“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 sn
apped. “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.
“But it’s in U.S. dollars, not yen?”
“Also correct.”
“And the maturity’s eight years from now, at a fixed interest rate of seven and a half percent?”
“That’s right.”
“Pretty sweet deal,” Lawrence Bonner observed.
“Yes, it is,” Herb Wylie agreed. “It’s better than anything we could do with the U.S. banks. Right, Mr. Banker?” he asked, turning to Ed Sharett.
“I’m sorry, what was the question?” Sharett asked, obviously wool-gathering at his end of the table.
“On-Line’s Japanese loan,” Bonner said. “Seven and a half percent fixed for eight years. Could your bank beat that?”
“No way,” Sharett said. “We’d like to borrow on those terms.”
“What we’re getting at, Harvey,” Bonner said, “is that Applications regards this cheap loan as a valuable asset, which was taken into account in pricing the deal. We assume it will continue after the merger. And we also assume that Machikin’s consent to the merger will be required. Is that correct?”
“That is correct,” Rawson said. “We’ve already started work on getting it, and the preliminary report is there won’t be any difficulty.”
“Who’s working on it?”
“Our Tokyo office. Schoonmaker arranged the loan in the first place so it makes sense for us to get the consent,” Rawson said.
“And it looks like there’s no problem?”
“That’s what Tokyo tells us.”
“I’m glad to hear it,” Lovett said. “That loan’s important to us.”
“We understand,” Rawson said.
After a discussion of the logistics of deploying accountants and lawyers to press the due diligence examination of On-Line forward, Merriman asked if there was anything else anyone wanted to bring up.
Before anyone could answer, Merriman’s boss entered the room. “Bill Richardson,” he said heartily, as he shook hands with the outsiders—paying no attention to the names he heard back—and took an empty seat two down from Merriman’s. Tall, with a patrician bearing, he looked every inch the self-confident, middle-aged Yale man that he was.
“How’s it going?” he asked.
“Pretty well,” Merriman answered. “We’ve just—”
Cutting her off in mid-sentence, Rawson interrupted to “express his concern” about the proposed timing. He made his pitch all over again for a closing on the twenty-first. “If we get early termination of the Hart-Scott waiting period, which even Ms. Merriman seems to think is in the cards, don’t you think the twenty-first is doable, Mr. Richardson?” he asked. “Can’t all the lawyers’ nitpicking be done by then?”
Merriman, furious at Rawson’s attempt to go over her head, slipped a copy of her draft time schedule to Richardson.
“I’m not sure I like to think of our legal work as ‘nitpicking,’ sir, but—”
“Harvey, we’ve been all through this,” Merriman said. “We—”
“I know your views, Julie,” Rawson said, cutting her off again. “I’m interested in what Mr. Richardson has to say.”
Richardson, veteran of a hundred such arguments over timing, did not need an explanation of the dispute. He put on his half-glasses and judiciously looked over Merriman’s work product.
“I think the twenty-first would be a little tight, sir,” Richardson said, still uncertain of Rawson’s name. “Ms. Merriman’s schedule looks like a prudent one to me.”
Rawson looked disgusted, his appeal to a higher authority denied.
“Any other burning issues?” Richardson asked.
“Not yet,” Merriman said.
“Good. For my sins, I have to catch a plane to the snowbelt this afternoon, so I’ll leave yo
u to get on with your important business. I’m glad to meet you all, and I’m sure Ms. Merriman will look after you with her usual skill.”
Richardson stood, waved perfunctorily at the group and left quickly, before he could get caught in the middle of any other ruckus.
“Julie, is there a room here I can use?” Lovett asked, once Richardson had departed. “I want to talk to the Wylies about some operating stuff while we’re all here together.”
“You can use this one. I’m going back to my office to begin work on the merger agreement.”
“I’d just like to say one thing,” Harvey Rawson said, raising his high voice to be heard over the bustle caused by papers being packed up and Jim Lewis’ efforts to get back the pad with the participants’ addresses and telephone numbers. “This is a merger made in heaven. The fit between Applications and On-Line is fantastic. I know we’re on a tight timetable, but it’s to everybody’s advantage to get this one done. So go to work, guys!”
Julie Merriman walked up the fire stairs to the thirty-first floor, Beth Locke at her side. “I think we’ve got everything on track,” she said, with satisfaction. Harvey Rawson and his ridiculous time schedule had been faced down—twice—and she had established hegemony over the important details of the merger.
“It’s going to be rough, Beth,” she said. “But with a little of the old Chase & Ward do-or-die, we’ll get it done.”
CHAPTER
3
A Merger Made in Heaven: II
The next three weeks were busy ones for Juliana Merriman. Not only did she have to supervise—if from a distance—the small investigative army of lawyers and paralegals that descended on the headquarters of On-Line in New Jersey, and then collect and analyze the results in a “due diligence” memorandum for her client, but she also had to draft the basic merger documents. And then sit, as she had done the previous week, for two interminable days (and one night past two in the morning), negotiating them with the Wylies and their bankers and lawyers. Plus an added half-day with the First Fiduciary people, hammering out the terms and covenants of Applications’ loan agreement.
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