Moonlighting into M&A: Tradeoffs in Practice

Katya Valasek:

We're joined today by Stephanie Hurst, an income partner at Mayer Brown, a firm with about 1,900 lawyers and about $2 billion in annual revenue. It's also the firm where you had your 2L summer and where you've worked ever since. Today you primarily do mergers and acquisitions, also known as M&A, along with some additional transactional practices that complement your M&A work. But you didn't start off doing transactional work after law school. What were you doing in those early days?

Stephanie Hurst:

In my early days, I was actually a litigator, and I did general commercial litigation, mostly representing the defendants in cases as opposed to the plaintiffs in cases that brought the claim. So totally different skill sets, a lot more interactions with the courts as a litigator, totally different practice than what I'm doing currently.

Katya Valasek:

And was that what you wanted to do at that point in your career, or were you forced into that?

Stephanie Hurst:

For me, being a lawyer was all about the people. And I had gone into law school initially looking at human rights work, and then I started to find a passion for the business side of things and working on negotiations. But during my 2L summer, when I was working at Mayer Brown, I fell in love with the people, to be honest. And I came out of law school in an interesting time. It was post-2008 financial crisis, and there just wasn't a lot of deals going on. And so my offer was in litigation, but it wasn't my first choice, but the people were my first choice. And that was most important to me.

Katya Valasek:

So you're obviously in M&A now. And you said part of the reason you initially were guided into that litigation practice area immediately is because it was the post-2008 financial crisis, there weren't a lot of deals going on. So what changed?

Stephanie Hurst:

There was probably a couple of factors I could say that allowed me to make the pivot. One of them was when I first started as a first year at Mayer Brown, there was a partner that I still work with today that moved back from our London office. So it's now been almost 14 years that we've worked together. And I asked if I could moonlight as his corporate associate. And it allowed me to continue to build the corporate skills that I needed and not kind of fall behind with my class level while still being a litigator during the daytime. And a lot of biglaw firms work this way. You are hired to a specific practice group usually, or at least a specific area.

My focus had to be litigation because that is what I was hired for, and that was the practice group I was working in. I call it moonlighting because really, it was my side job, but within the same firm.

Katya Valasek:

So then does that mean that those moonlighting hours didn't count towards your annual billables?

Stephanie Hurst:

Oh, a hundred percent they did. Because I was still billing a client, for example, for doing my work, I was still contributing to the firm, and it was still legitimate work that I was doing. It was just not within the practice group that I was designated as. It is sometimes a little bit extra that you're putting in than maybe your peers are doing, but it was something for me that was very important and also something that the firm was really positive in terms of supporting my own goals as well.

Oftentimes, they made concessions as opposed to being staffed maybe on 10 cases. I'd be staffed on six, and then that allowed me to also explore this other area that they knew I was interested in as well.

Katya Valasek:

That's amazing. So as you continue to explore M&A, you were working with this partner. Did the transition happen over time? You went from six cases to four cases to one case as you moved to M&A, or did you have to fight for that opportunity?

Stephanie Hurst:

It was a bit of a transition, and it definitely wasn't linear. It went along the lines of client demand. It went along the lines with how things were playing out on the litigation front as well because we were very busy. There were some days that I would be staffed only on litigation matters and no transactional work. Then about a year and a half into when I started at Mayer Brown, I had the opportunity to relocate to our firm's Hong Kong office. That is when I officially cut ties with litigation and became a full corporate M&A lawyer.

Katya Valasek:

You're a U.S. educated attorney. You're barred in at least one state in the United States. What kind of work is available for you to do in Hong Kong?

Stephanie Hurst:

The interesting thing about transactional work, one of the things that also drew me to it because I have a very international mindset. When you think of litigation, we'll touch on litigation first, your job is in front of the courts. You have to be qualified to practice in those courts. Now with a transactional lawyer, when you're looking at deals that cross borders, when you're looking at deals that involve parties from different jurisdictions around the world, there's usually several different governing laws that will govern those transactions. One of them happens to be New York law.

During my first year at Mayer Brown, when I was a litigator, I actually took the New York bar exam so that I could have both California and New York, which would allow me to be qualified to practice with these international transactions. Working in Hong Kong, a lot of the deals that we did were governed by New York law or had some kind of New York element to them. If it was a public deal, it would price on the New York Stock Exchange or NASDAQ. There was always this tie to the U.S., and we would then engage with our colleagues if there was an English law component or if there was a Singapore component or we would engage local counsel if there was Mauritius or different jurisdictions. There was always some tie in the deal to New York. That is where our role as transactional lawyers in Hong Kong played into.

Katya Valasek:

You were still a relatively young attorney when you went over to Hong Kong. Sounds like these transactions could get really complex with the representation or with counsel from different countries. Did you get a lot of early interaction with the clients and the other attorneys who may have been involved or did that come later?

Stephanie Hurst:

A hundred percent. When you are working in a small office, while our Hong Kong office was quite large at the time, the U.S. practice group was very small. There were two partners. One did capital markets, which is more public-facing transactions like public companies or involving stock exchanges, things like that. Then on the private mergers and acquisitions side, where you're outside of those public markets. From day one, you were given authority and responsibility for effectively taking the initial drafting or the documentation. I was a month and a half in and at that point, not even two years into being a lawyer and asked to draft bond documentation.

You either sink or swim. Some people don't like that. Again, it was this challenge that was put in front of me. I was like, we're going to do this and we're going to figure it out. There's something beautiful about that because from day one, you're really learning what it means to be a lawyer and learning how these deals play out and you're thrown into the fire. You were figuring this stuff out on your own or trying to.

Katya Valasek:

What were signals for you that you needed to ask someone for help?

Stephanie Hurst:

Typically, how it would work is you would be given a precedent. In our world, a precedent means it's a deal that was done before, possibly for the same client, possibly that was in the same industry. Really, it's almost becoming a student of what that precedent looked like and then building on that and using it in the current context of whatever transaction you were working on.

You would start from that and you would take the time to think. Then you'd reach out to senior associates that were working with you and say, hey, this is where I'm thinking of going on this. This is how I think we need to revise this documentation. What do you think? Then you could have a real fruitful discussion and something that you bring something to the table with and say, okay, here's what I think we need to do. Am I on the right track?

Katya Valasek:

Now to more of the details of your M&A practice, which is about 70% of your time. Can you start by explaining at a high level what someone means when they're referring to mergers and acquisitions? Then more specifically, what types of deals fall into each category?

Stephanie Hurst:

Mergers and acquisitions is an umbrella term and it encompasses a wide variety of different transactions. If we start from the merger side of things, this is where effectively you're bringing two companies, maybe more, and you are merging or putting one company into another one so that that other company disappears. These can be structured in different ways, like a forward merger, reverse triangular merger, and all of these terms get quite complicated. For example, you'll have a merger where you have a parent company, and they drop down a subsidiary. That just means that the parent company will form a new company below it. It wholly owns that company. Then that company may be the one that acquires the target company. That target company will merge into the subsidiary of the parents such that that target now becomes a subsidiary of the parents with the original subsidiary disappearing. Then this is a way to cut off liabilities between the companies if they drop a parent or a subsidiary below. The structures are done in a way to one, limit liability in certain areas to reduce the need potentially for third party consents.

One of the areas on the merger side of things, you're looking at material contracts. You may be looking at this target company. They have all these contracts. They're very valuable. They have great relationships with these counterparties and you're like, this is really the source of value for this company. But those contracts might have consent requirements that say you cannot assign this without our written consent and that may cause problems in the transaction. There's ways that you can structure things that limit the need for third party consents. That's some of those considerations on why you do mergers.

Katya Valasek:

Who all is involved when a merger is being done?

Stephanie Hurst:

When we're looking at the initial structuring phase, there's a bunch of different advisors that are involved. You have tax advisors, and these are both tax lawyers as well as the client's own tax advisors. You have accountants that are involved. You have specialists that are involved. If you're looking at a cross-border deal, these specialists could be ones that are looking at what we call CFIUS, which is basically how are you going to get U.S. government approval for national security reasons if it's an extensive area. You have labor and employment lawyers. You have benefits lawyers. You have the whole range of specialties that come in.

But really, the most important ones at the beginning, you're looking at tax. You're looking at accounting. You're looking at what the key assets of that target are and what might play into that and really structure the transaction in a way to minimize those risks and also minimize the cost.

Katya Valasek:

As one of the attorneys on the transaction, how do you interact with this wide range of experts and people who have very different interests that they're keeping in mind?

Stephanie Hurst:

As an M&A attorney, one of your biggest roles actually is to what I always call manage the group. You are effectively the source and the head point contact for that deal. If you're working with a banker, you might be working hand in hand with a banker as well. When you're all on the same side, it's really working together and just making sure people have the facts that they need to know, really understand what the client's goals are and what is their motivation for that particular transaction. It could be a strategic one. It could be they're trying to get some type of intellectual property. It could be that they're a foreign company that wants to develop some type of presence in the United States. Really understanding those drivers will help you better interact and better educate specialists who may only see a small part of the deal.

Katya Valasek:

Okay. That is a merger. That is two companies, sometimes more than two, coming together. What's an acquisition?

Stephanie Hurst:

An acquisition, that could be, again, structured a bunch of different ways. It typically falls, we'll say, in two buckets. You have stock acquisitions or equity acquisitions. That's where you buy the stock or if it's a limited liability company, you acquire the membership interests, basically the equity side of it.

Then you also have an asset acquisition. This might be where you just buy the assets of the company or select assets of the company. That entity remains separate from your own corporate structure.

Katya Valasek:

We've covered acquisitions. What is your primary focus? In these two big buckets, primarily, what types of deals are you working on?

Stephanie Hurst:

It totally varies. I would say probably the majority of them fall within the stock or equity acquisition or the asset purchase side of things. Occasionally, the mergers come into play, but usually those are internal reorganizations where a corporate group is trying to simplify its internal structure. There have been a few that I've worked on where it's external. I think we did three or four a couple of years ago where we had an international client that was looking to acquire targets in the US. They bought those targets through several rounds of acquisitions, where it was a minority acquisition and parts of it, and then merged those assets together to simplify their structure. I would say most of it's on the equity or asset side.

Katya Valasek:

When you say stock acquisitions, that means some entity is buying shares of a company to try and acquire a controlling interest, correct?

Stephanie Hurst:

Yes. It could be a full acquisition. You could acquire 100% of the outstanding equity interests. It could be a partial acquisition where you are acquiring majority control. There may be reasons that you don't want to acquire majority control for government approval reasons or some other reason. Then you acquire maybe 10%. When I say stock acquisition, you're acquiring outstanding equity interests from the existing equity holders.

Another part of my practice also is new stock issuances. In the venture capital context where a company is trying to raise funds, then they'll issue new shares. That's coming from the company as opposed to buying from the existing holders.

Katya Valasek:

Have you ever been involved in a hostile takeover?

Stephanie Hurst:

I wouldn't say it was a hundred percent hostile. There was definitely some interesting plays at hand where one of our clients, one of their biggest competitors was also a shareholder in this target company. They were both minority holders. We got a call late on a Friday night that said, we understand our competitor is seeking to try and buy out all the other holders. We want to do that first. It was tangentially related, but it was more of going after their competitor to make sure that they didn't take the company. We won, by the way. Just to throw that out there.

Katya Valasek:

Then what about cash acquisitions?

Stephanie Hurst:

Transactions can be structured a bunch of different ways in terms of how you are buying it. It's not about buying the cash in the company. It's more about how you're going to pay for the company. Sometimes you'll have a company where you pay by issuing the holders or the company itself stock in your own company. Sometimes you pay for it with new debt that comes on or where you take out a loan. Sometimes you pay for it with cash on hand. There's a bunch of different ways that you can pay for it. Also, the consideration that you pay for a company or an asset that you're buying can be structured where it's paid all on day one, or it can be structured where you pay maybe half up front. Then you have something in the purchase agreement that's called an earn out, where if certain targets are met, then they'll get more money on the backend. It could be based on a different revenue target. It could be based on customer acquisitions, a whole bunch of different things. Then that would allow additional compensation to be paid in the future after the deal. There's a bunch of different ways that you can structure it.

Katya Valasek:

Do your clients fall into a few common industries because of happenstance or is there a developed expertise or developed connections over time that lead to this?

Stephanie Hurst:

I would say there's probably three, maybe four big areas I work in. One of them being tech, and that's a whole bunch of different tech areas. You have fintech, clean tech, ag tech, ed tech. Those are probably the biggest areas of tech and then just general technology that they're trying to acquire. Another area is food and beverage. That's the whole supply chain of food and beverage going all the way down to the agricultural assets, what they call agribusiness. Then the other area is infrastructure, so buying assets in the infrastructure space and taking advantage of what used to be some government incentives on that front. You end up developing somewhat of an expertise so that folks in the firm or clients or other people recommend you for a particular type of deal.

Then some clients that are multinational conglomerates that work in a bunch of industries, you just end up working on different deals for them based on that relationship. It's relationship driven on that front, but industry agnostic. Then sometimes you just end up developing an expertise that makes others reach out to you based on their knowledge that you've done deals of that sort.

I will say most deals are probably 70% the same, regardless of what industry you're in. Then there'll be some flavoring, we'll call it on the top, to fall within different industry groups or different types of assets that are being acquired.

Katya Valasek:

It strikes me that in terms of developing an expertise as a young attorney at a firm, you're being guided by the connections or the expertise of the partners of the practice area. When you say you develop an expertise, it's not that you decide you're interested in something, it's the buffet of issues in front of you. You do good work for one of the partners, they keep giving you work, and then all of a sudden you're a fintech M&A expert. That's how it happens, I would imagine.

Stephanie Hurst:

I would say that happens a lot. Interestingly, our Los Angeles office, we've had the opportunity to work on a wide range of things, just given how the market is structured here. I will say that Mayer Brown is really good from when you're a junior associate for you to get involved in different industry groups, for you to work with partners that aren't just in your particular home office, but around the firm. They encourage you to seek out new opportunities with different partners.

There's one partner that works up in Northern California. He is very focused on the insurance side of M&A, so insuretech, any M&A transaction in the insurance space. There's an insurance practice group. Associates reach out to him all the time because that's something that they're really interested in doing. They might not be located in Northern California, but it's an area of interest that they have.

I think one thing as a junior associate that's important is to really reach out and be keen to explore opportunities with partners that might not be necessarily in your office, but that are working on areas that you're interested in.

Katya Valasek:

You had a fairly clear idea that you wanted to do transactional work when you started. Is there anything about the practice area that surprised you as you got deeper and deeper into the work?

Stephanie Hurst:

There's probably two things that have surprised me a bit about it. One is how much you spend of your day talking. Everyone thinks litigators, oh, they're in the court all the time. They're arguing. They're constantly on the phone, but I actually found that that occurred more on the transactional side. You're always talking. You're talking to the client to find out their concerns or their deal points or what they're trying to negotiate. You talk to the other side to negotiate the points. You're talking to the advisors. You're talking to specialists. So when you have a big deal going on, sometimes you're on the phone for eight hours a day talking to different groups. That was one thing I think that really surprised me is how much you spend of your day talking.

Then I think the second point is just how busy a transaction can get. When you're in a large transaction, there could be days when you're working 15 hours a day to get the deal over the line. Often there's lots of drivers beyond what lawyers, law students would think of that drive timelines. It could be that they need to get the deal done before the end of the year for tax and accounting purposes. It could be that they need this particular asset to keep their business going by a certain time. Or there could be some other accounting or operational reason of why something has to be done so quick. I think as law students, especially when you're quite junior, you don't fully appreciate all these drivers of time on a deal.

Katya Valasek:

On top of everything else that you're doing for your job, you also travel a lot. What are you doing when you're traveling for work?

Stephanie Hurst:

Given my practice, which is largely cross-border focused, a lot of my clients are not actually based in Los Angeles. I have clients based around the world. Sometimes it's visiting clients. Sometimes it is visiting law firms in other jurisdictions. This is one thing that I was not aware of as a law student, but sometimes your biggest clients are other law firms that are located in other jurisdictions. A lot of it is networking. A lot of it is developing those relationships with some of your key clients or counterparties. Sometimes it's doing deals in other countries. We were in Korea for a deal and negotiating a deal there. Sometimes it's attending conferences. A big part of being a lawyer is making sure that you're fully up to speed on all the new developments in your particular practice area. And also ensuring that you're getting out there and developing a brand for yourself, giving talks, participating in conferences, giving presentations. I would say that those are probably the two biggest drivers in terms of why I travel a lot for work.

Katya Valasek:

You are doing a lot. It sounds like you started out at the very beginning taking on a lot. I feel like there must be times where you just feel out of control. What's your experience with feeling like you are standing on stable ground in your day-to-day life?

Stephanie Hurst:

I think one thing about being a lawyer, and especially about being a transactional lawyer, and the more senior that you get, you have to be comfortable with being uncomfortable. Really embracing the fact that you won't necessarily always know everything. You won't necessarily always feel like you have control, but just being comfortable with the fact that you have these processes in place. You have teams that you can rely on. You have that knowledge. You understand where things are going and just being comfortable with being like that.

Sometimes, it's not necessarily all sunshine and rainbows. It is a lot of work on the best of days. For me, really having a team that I trust, for me working with people that I really enjoy working with, and being able to lean into that is something that makes the intense days not so bad.

Katya Valasek:

With these intense days, what is your philosophy on work-life balance? What do you do to step away from the work?

Stephanie Hurst:

I think when we talk about work-life balance, and I can say when I was a law student, I was like, oh, you can check out at the end of the day, and maybe rest for the remainder of the day. I think being a big law firm lawyer, and especially on the transactional side, you have to be okay with work-life balance not necessarily looking like it looks like for other jobs where you might check out at five o'clock and you're done for the day. That's not really what big law firm life is like. That's okay, but it's developing things that work for you.

For me, one of my big passions is being able to work out. I carve out an hour in my day and have that time to myself to really maintain fitness and things like that. It's taking a late night dinner with my husband. For me, that is the work-life balance, and being okay as well and saying no to things when you can, and trying to create balance that way. When you have a big deal going on, you have a lot of demands, you're traveling at the same time, being able to check out at five o'clock is just not going to be work-life balance.

Katya Valasek:

Did you get that impression when you were a summer associate, or did that not really sink in until you started at the firm?

Stephanie Hurst:

When I came out of law school, given that it was the financial crisis, given that there was a lot of fundamental shifts that were happening in the legal industry at the time, you may remember you had summer associate programs that had been like 30 law students, and then the economy collapsed, and then only five of them got full-time offers. So I think given when I came out of law school, I was like, I am lucky to have this opportunity, so I will always say yes, I will always be there to do whatever needs to be done. I think from the very beginning, I was aware that it wasn't going to be a nine-to-five, and maybe it's because of when I came out of law school.

Katya Valasek:

That's interesting. You went in with a mentality saying, I will always say yes, I'll be grateful for this opportunity, but you also just said that you have learned when is the right time to say no. That, I imagine, is challenging, especially for younger attorneys. Was there a point in time that you can identify that it clicked for you, that you can't just always say yes, you can't always be grateful for every opportunity?

Stephanie Hurst:

I'm still learning this, so I can talk a big game and say, oh, I've learned to say no, and I do, I have gotten better. But I had a great mentor that guided me on certain things, and especially when you're a junior associate, you don't want to say no, you want to say yes to all these opportunities, you want to say yes to working with different partners or taking on new matters, and you don't want to be seen as that person that's saying no. However, if you always say yes, and you're working on, say, for example, seven deals, and they're all full on at that time, there is no way that you are going to be able to do a good job, and there's no way that you are going to be able to ensure you're serving your clients the best that you can, and that ultimately ends up hurting you going forward. So you say yes to the point of where your work quality starts to fall apart, and where your ability to serve your clients starts to fall apart.

And as a junior associate, I think one thing that I will tell my mentees as well is, if you're asked to join a deal, and you're already working on five transactions, talk to the partner that asks you, and oftentimes the partners will work together to ensure that associates have the ability to take on different types of things, but it's really about communication and understanding some of the key drivers, some of the key timelines, and ensuring that you're being responsive, but also ensuring that your quality of work doesn't fall apart, and that you can sleep, and you can take care of yourself at the exact same time.