The Reality of M&A: What Law School Doesn't Teach You

Mergers & Acquisitions (M&A) is a unique field within the legal profession. For many young lawyers, the transition from law school to practice is a tough learning experience. The legal foundations of M&A are largely familiar to law graduates specializing in corporate law, contract law, company structures, and due diligence processes form the basis. However, two crucial domains are hardly covered in legal education: financial literacy and soft skills.

The Missing Financial and Strategic Perspective

“Understanding a balance sheet and the economic principles behind a deal are things a lawyer rarely encounters in his or her studies. Business valuation, share valuation, and the impact of financing structures are essential to properly guiding an M&A transaction.”

Additionally, negotiation skills are indispensable. M&A is not just about legal clauses but also about people, egos, and strategic interests. A significant part of the job is preparing and guiding clients: prepping them for a deal or making them push back against one. This requires insight into group dynamics and negotiation. What textbooks often don’t capture is how legal expertise fits into the larger deal structure. Lawyers must navigate a web of stakeholders beyond just buyer and seller, including banks, investors, and external advisors.

“In an acquisition, you must consider not only the seller and buyer but also banks for financing, shareholders with preferential rights, and sometimes multiple legal teams with different interests.”

This stakeholder management makes M&A transactions complex and time-intensive. A lawyer must not only master the legal process but also understand the broader business context.

The Emotional Side of a Deal

One of the most underestimated aspects of M&A is the emotional impact on founders. This is particularly relevant in startup exits, where emotions run high. Founders are not just selling a business; they are selling something they built from the ground up.

“The idea that founders are emotionally attached to their ‘baby’ is sometimes exaggerated, as they are well compensated. But what we do see is that they often remain contractually tied to their startup for years via earn-outs or stock retention.”

These contractual obligations can affect founders emotionally, especially when they no longer control the company they built. Beyond emotions, negotiations in M&A are not always purely legal or financial. Sometimes, emotional arguments can be decisive.

“In some cases, we see that a seller is emotionally attached to their company’s name and resists rebranding. This can be tactically used in negotiations to secure better terms.”

A strong lawyer must have a helicopter view and grasp how a deal works economically and strategically. Thorough preparation is crucial, and understanding financial statements can make the difference between a good and great M&A lawyer.

Bridging the Gap in Legal Education

A key question is whether law school adequately prepares lawyers for the realities of M&A. According to Ruben & Maxim, legal education lacks a practical approach to transactions.

“A course on ‘Practical M&A’ would be beneficial, covering not just legal aspects but also financial analysis, deal structures, emotions, and negotiation techniques. More collaboration between law faculties and the business world, perhaps through internships, mentorship programs, or interdisciplinary courses, could help aspiring lawyers develop these essential skills earlier in their careers.

That said, valuable collaboration initiatives are already underway. Our law firm, Mace, has organized a hands-on term sheet negotiation for law students last year. This year, we also plan to host another workshop in partnership with a law professor from the University of Ghent.”

Expanding on this, a well-rounded M&A education should include deal structuring, valuation methods, and the ability to analyze term sheets. Law schools could also integrate case-based learning where students negotiate real-world deals under time constraints. An introduction to corporate finance, understanding EBITDA multiples, and applying sensitivity analyses to valuation models would be highly beneficial. Currently, these skills are often learned on the job, creating a steep learning curve for young lawyers.

A practical M&A curriculum should also emphasize stakeholder management and process control. Many young lawyers assume that legal knowledge is their primary contribution, but in reality, project management and strategic thinking play an equally crucial role. Knowing how to navigate multiple parties, anticipate roadblocks, and manage expectations is what separates an average lawyer from a top-tier M&A advisor.

Bridging the gap between legal theory and business application would not only benefit law students but also improve the overall efficiency of M&A transactions. More collaboration between law faculties and the business world, perhaps through internships, mentorship programs, or interdisciplinary courses, could help aspiring lawyers develop these essential skills earlier in their careers.

The Modern M&A Lawyer

Success in M&A requires a combination of legal expertise, financial knowledge, and negotiation skills. Young lawyers looking to stand out in this field must not only focus on contracts and clauses but also learn to navigate the economic and human aspects of a deal. Mace Legal helps founders through these complex processes, ensuring that legal obstacles do not hinder growth. With the right mix of knowledge, strategy, and technology, M&A lawyers can create more value for their clients, and for themselves.