Over the past ten years, increased attention has been paid to incorporating the elements of corporate transactional practice in the law school curriculum. Employers—in particular, law firms—increasingly demand that law students have some exposure to the skills required to be a strong deal lawyer.
The traditional law school curriculum, even business law classes, generally focuses on analyses of case law and the study of legal theory. Much of the material used in these courses, particularly case books, primarily focus on judicial opinions and the theoretical underpinnings of various legal rules. Of course, law students need to learn important analytical skills by reading cases and creating a foundation in various legal theories. However, these traditional methods may not be sufficient to train graduating law students who decide to pursue a transactional career.
Recently, law schools have begun to address this void in their curriculum by developing transactional law classes. These classes, such as the “Deals” courses, aim to introduce law students to transactional practice. While ideal for students that intend to pursue a transactional career, these intensive courses can be expensive and difficult to provide because they are time-intensive for the professor and cannot accommodate the large numbers of students who want to pursue such careers. Moreover, it is not sufficient for students to learn transactional skills from just one course.
Elements of transactional practice can be readily incorporated in existing business law courses. Business law faculty can address law students’ needs by emphasizing the important relationship between law and business, and incorporating the basic skills involved in transactional practice in traditional law classes. These skills do not just involve drafting and negotiation skills, but they also involve the language of finance, how to learn about a client and the client’s needs, how to understand the transactional context and how to use precedents as lessons for their own transaction.
Much has been written about the need to provide courses that allow students to master drafting and negotiation skills. In this short essay, I will analyze some of the other “business” skills that I found necessary during my transactional practice and how law school professors can help students gain these skills even in traditional law classes.
In October 2000, I began my first week as a lawyer in the corporate department of a large New York law firm. During law school and my clerkship, I had been trained in deciphering case law and basic statutory analysis. However, I knew little about business and had no opportunities in law school to draft documents or do legal research and analysis in the context of a particular client’s real business goals.
One of my first assignments was to draft an amendment to a complicated credit agreement and to negotiate the amendment among a consortium of lenders, the borrower, and the guarantor. Many of the changes involved financial covenants, and the guarantee and security provisions. I was eager to impress on this first assignment, but there were a few problems: I had never analyzed or even read a credit agreement in law school, did not understand the language of the financial covenants or know about the purpose of covenants in a credit agreement, and had little knowledge about the borrower. While I was open to learning about the nuances of the agreement, my two-day deadline afforded me little time to learn the various intricacies of a one-hundred page credit agreement. Of course, this was problematic since I was assigned to amend the “relevant” sections of the credit agreement to reflect the terms of the new business agreement among the various parties. Suffice it to say, I spent little time sleeping during that 48-hour period.
This initial adventure was replicated repeatedly in my first few years of law practice. Each time I worked on a transaction, the clients’ business would change and I found myself spending time not only learning new skills (how to do due diligence, how to draft a voting agreement, etc.) and the substantive law involved, but also learning about the business terms used in different deals and about the business and industry of the client. During all of this, I spent some time reflecting on my law school education. Why was there so little emphasis on the language of finance and the general business knowledge necessary for budding business lawyers? Why was there so little discussion about the lawyer’s role in representing corporations? If we were to perform so much due diligence, why was there no introduction to this task in law school? Why had we never looked at a contract in any class? Why had we never reviewed a corporation’s charter or bylaws in the corporations course? And the questions went on. It struck me that my law school education had taught me how to think like a lawyer (perhaps even just a litigator), but had given me little of the skills and vocabulary needed to be successful in the practice of transactional law and few tools to help me think creatively about possible answers to issues at the intersection of law and business.
My experiences in learning the business side of legal practice were eye opening. The practice of transactional law is similar to other professional business services; the lawyers are paid by clients put together a service package to solve problems and make the client’s life easier. After my initial few years in practice, I began to recognize similarities in the legal and business skills of the best attorneys with whom I worked, and tried to emulate their approach to a transaction.
While this may sound surprising, many young deal lawyers enter practice without some of the substantive background necessary to practice transactional law effectively. While students who plan to practice transactional law may take a business associations or securities regulation course, they may, for example, not take a corporate tax or a partnership tax course. In fact, it would be difficult for most students to anticipate the intricacies of the many substantive areas of the law involved in many transactions. While law firms, in particular the larger firms, have traditionally offered extensive training for new attorneys, young lawyers who begin practice at small firms or firms that do not provide training in various areas of the law often learn these intricacies much later in practice.
One of the weaknesses of young attorneys is that they often fail to recognize that many deals involve various substantive areas of the law. For example, it is close to impossible to advise a corporate client who wishes to purchase a public company in the technology industry without the advice of transactional attorneys (who will need to know both the applicable state corporate laws and the relevant federal securities laws), tax attorneys, intellectual property attorneys, employee benefits and compensation attorneys, and perhaps even other specialists such as environmental law attorneys. Part of this failure arises from the young lawyer not understanding the client’s business and corresponding legal environment.
Traditional law school classes can offer students at least a glimpse of the various areas of the law involved in transactions. Business transactions rarely involve just one issue or one substantive area of the law. Professors can use complex transactions as sample problems to review in business law courses to demonstrate the importance of the depth and variety of the legal issues involved in most transactions. They can also demonstrate the complexities of transactional practice through other teaching methodologies. For example, mergers and acquisitions professors could invite tax experts to give an overview of the tax implications of various merger structures, or benefits experts who can speak to the employee benefits issues involved in an acquisition of a company with a large employee class that holds stock options. I am not suggesting that students can learn all of these substantive areas in a semester long class, but an introduction to the interaction of various areas of the law would allow students to recognize that in most transactions lawyers will need to know more than one area of the law or have specialists involved in advising the client.
The substantive knowledge required to practice law can be gained by almost anyone. Moreover, because of law school, most lawyers have enough analytical skills to get most legal work done. What distinguishes the successful lawyer is the ability to think creatively and to provide high-quality service in a way that adds value to the client’s transaction goals. Clients seek lawyers that can spot legal issues and provide solutions that are not just correct, but are also practical in light of the client’s business.
Like many law students, I went through three years of law school with little understanding of business. I took the typical business associations course, but the class did not convey the importance of understanding the “business” in “business associations.” In fact, there was almost no emphasis on understanding your client’s business and industry. In transactional practice, understanding your client’s business is critical for effective representation and serves an invaluable purpose during due diligence, negotiations and drafting of documents. Clients want attorneys that present and analyze legal issues in the context of the client’s business. For example, if a technology company client is unable to register their stock option plan because of certain securities laws issues, simply telling the client that they can no longer grant options may not work. The client’s inability to grant stock options may mean the loss of valuable employees, in particular software engineers. Therefore, the client’s lawyers need to present creative ways in which the client can address the demands of its valuable employees.
Prior to commencing work on any transaction, my legal knowledge could be used best when I was familiar with the client and the client’s business. I asked questions as to the source of the company’s revenues, its industry dynamics, the client’s operating history and the experience and breadth of the client’s management team. This initial investigation of the client allowed me to prioritize and focus the work that I performed. It also allowed me to perform due diligence and negotiations from a position of knowledge. Devoting time to learning about the client allowed me to understand their needs and appetite for the legal solutions to their problems.
Business law faculty can emphasize in class that clients expect that their lawyer is up to date on recent business news, on the client, and on the client’s industry. Technology makes gathering this type of client information fairly quick: lawyers can read their client’s annual and quarterly reports, set up news alerts on their client and other companies in the client’s industry, or review the trade press for industry insights. Faculty can, for example, invite guest speakers to discuss the due diligence process or study recent transactions that have been affected by trends in the particular company’s business or industry. For example, the recent litigation arising from the dispute over the proposed acquisition of Sallie Mae in 2007 not only involves contract interpretation but also is directly related to the downturn in the credit markets, Sallie Mae’s own financial struggles, and recent legislation related to student loan lenders. A study of this transaction in a mergers and acquisitions course can highlight for students the intersection of issues involving the law, contract drafting, and business/industry trends.
Young transactional lawyers often begin practice without the understanding that they will often need to be familiar with the latest news and trends affecting transactional law. Most law school courses do not emphasize the need to remain current on emerging issues at the intersection of law and business. However, the best transactional lawyers are deeply aware of recent matters in business law and think through their impact on the lawyers’ clients. A lawyer’s knowledge of this recent information allows the client to view the lawyer as a partner and as someone “in the know,” which can help augment the lawyer’s relationship with the client.
Business law faculty can incorporate discussion of the latest news and trends into the classroom and emphasize for students that they will greatly enhance their relationships with clients by highlighting this knowledge. Use of recent commentary in law blogs or discussion of articles on current topics in business law journals can help instill in students this professional education component of law practice. Regular reading of business law journals can often help lawyers gain access to current and valuable legal and business analysis. For example, in the 2007 issue, the UC Davis Business Law Journal published an article entitled “Preparing Proxy Statements Under the SEC’s New Rules Regarding Executive and Director Compensation Disclosure.” The article discussed newly required disclosure about which many public companies have been agonizing and turning to their lawyers for advice. Knowledge about such disclosure could help a young attorney make a strong impression on her superiors and clients, which could lead to greater responsibility and more interesting assignments.
Young attorneys often fail to know much about the language of finance used by their clients and their client’s financial advisors. For example, many junior lawyers on merger transactions fail to understand the role of the client’s investment bankers and, at times, the terminology used by the bankers. The failure to understand the terminology used by those on the business side of a transaction can often lead to embarrassing mistakes by the young attorney. Such mistakes can also lead to clients losing confidence in their attorneys. For example, a young lawyer may not understand the term basis points and so draft a loan agreement incorrectly when the client requests that she draft the interest provision at LIBOR plus 50 basis points, and she presents draft language at LIBOR plus 50% (of course, she may also not understand the term LIBOR).
Traditional business law classes should incorporate course materials that introduce students to the business side of transactional practice. Basic introduction of business news and jargon, such as the use of the Wall Street Journal in the classroom, allows students to become familiar with the terminology and vocabulary used by their clients. Professors can use articles that deal with material covered in class to highlight the real world aspects of the theory or rules being explored in the classroom. Professors can also invite guest speakers who are not just practicing transactional lawyers but also individuals who work on the business side. For example, an investment banker who heads underwriting teams working on initial public offerings can present the business side of these securities transactions and convey to students some of the terminology used by the bankers.
It is clear that law students require much more transactional skills training in order to be effective deal lawyers. While it may be ideal for students to enroll in intensive classes that address transactional skills, some of the skills needed for effective transactional lawyering can be incorporated into traditional business law classes. Incorporating a business focus in such classes can be an effective method for improving the training given to future transactional lawyers.
 See Francesca Jarosz, None of your business? No, 16 Bus. L. Today 1 (2006), http://www.abanet.org/buslaw/blt/2006-09-10/jarosz.shtml; see also Tina L. Stark, Thinking Like a Deal Lawyer, 54 J. Legal Educ. 223 (2004).
 See Seth Freeman, Bridging the Gaps: How Cross-Disciplinary Training With MBAs Can Improve Professional Education, Prepare Students for Private Practice, and Enhance University Life 2-3 (N.Y. Law Sch. Clinical Research Inst., Working Paper No. 06/07-12, 2007), available at http://ssrn.com/abstract=975501.
 See William Sullivan et al., Educating Lawyers: Preparation for the Profession of Law (2007), available at http://www.carnegiefoundation.org/files/elibrary/EducatingLawyers_summary.pdf;Kenneth N. Klee, Teaching Transactional Law 1, 10 (UCLA Law Sch., Working Paper No. 03-17, 2003), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=445823.
 See Francesca Jarosz, None of Your Business? No: Law Schools Need to Bring Their Business Law Teaching to Date, 16 BUS. L. TODAY 1, 35 (2006), available at http://www.abanet.org/buslaw/blt/2006-09-10/jarosz.shtml.
 See Victor Fleischer, Deals: Bringing Corporate Transactions into the Law School Classroom, 2002 Colum. Bus. L. Rev. 475, 475-497 (2002).
 See id.; Sullivan et al, supra note 3, at 11.
 Fleischer, supra note 5, at n.5.
 Diane Fuchs, Leigh Johnson & Jane Jones, Preparing Proxy Statements Under the SEC’s New Rules Regarding Executive and Director Compensation Disclosures, 7 U.C. Davis Bus. L.J. 373 (2007).
Afra Afsharipour received her J.D. from Columbia Law School, where she was an articles editor of the Columbia Law Review and a submissions editor of the Columbia Journal of Gender and Law. Professor Afsharipour researches in the areas of corporate governance, comparative corporate law and corporate social responsibility. Prior to joining the Davis faculty, Professor Afsharipour was an associate in the corporate department of Davis Polk & Wardwell in both New York, NY and Menlo Park, CA, where she advised clients on domestic and cross border mergers and acquisitions, public and private securities offerings, and corporate governance and compliance matters. She also served as a law clerk to the Honorable Rosemary Barkett of the Eleventh Circuit Court of Appeals. She received her undergraduate degree from Cornell University, where she studied government, international relations and women's studies.