Temple Law students Victoria Faria and Sarah Ismael, who are members of Temple Law’s Alternative Dispute Resolution Society (“ADRS”), went to the ABA Business Law Section’s third annual National Invitational M&A negotiating competition, known as the MAC Cup. By reaching the Quarterfinals and competing in four negotiations, Victoria and Sarah finished among the top eight teams (“Elite 8”) of the original 64 student teams from law schools across the United States and Canada.
The MAC Cup requires students to create an issue list based on the competition’s fact pattern, mark-up an assetpurchase agreement (“APA”) reflecting the prevailing issues identified and then participate in a mock negotiation with other competitors. The competition allows law school students to learn about M&A deals and develop their negotiation skills by encouraging students to use the same tools M&A attorneys rely on, like: (1) the ABA’s M&A Private Target M&A Deal Points Studies; (2) Westlaw’s CoCounsel and Practical Law; and (3) Hotshot Legal’s digital learning video service.
This year, the competition centered on superstar couple Tara Quick and Ted Kickstart (the “Sellers”), who were selling their company, QuickPass Tickets, Inc. (the “Target”), to Mammoth, Inc. (the “Buyer”). Sellers and Buyer agreed that the purchase price was set at $300 million for the acquisition of substantially all of Target’s assets and the assumption of all of Target’s liabilities. However, the parties’ lawyers still needed to negotiate several complex issues. The most complex of these items was how to allocate the potential liabilities from an existing litigation in which the Target was involved, currently in the discovery phase, which, in a worst-case scenario, could cost over 25% of the purchase price and potentially force the Target to change its business model. Overall, the parties were free to propose changes in the sections that dealt with post-closing covenants (to include a non-compete/ non-solicitation), closing conditions, term definitions, termination, and indemnification (baskets/ deductible/ de minimis deductible/ caps and survival [and what is not subject to those limitations], fraud, materiality scrapes, sandbagging, etc.).
In the First Open Round, Victoria and Sarah represented the Buyer in the negotiation. With the help of their coach-attorney, adjunct professor Matthew Devine, the team spent most of their time familiarizing themselves with thecompetition’s key issues: indemnification, escrow arrangements, and non-compete/non-solicitation agreements. After learning about the substantive aspects of the competitions, the Temple team then had to tackle the practical aspect of the competition: reviewing the APA, selecting and creating an issue list, drafting changes APA to reflect their issues and creating a redline draft, reviewing due diligence documents, and reviewing the proposed terms sent by the Seller’s side.
Then came the negotiation. In a 45-minute negotiation, the pair was tasked with picking which issues to advance in the negotiation to best advocate for their client while accounting for the Seller’s issues. After the round, both teams received feedback from two judges who are M&A practitioners. Only half of the original sixty-four teams advanced after the first day of competition, and the Temple team was among those advancing teams.
After their second negotiation, where Victoria and Sarah repeated the entire initial process but now representingthe Sellers, they were delighted to hear that they had advanced to the Quarterfinals. But the Quarterfinals brought significant new fact pattern changes: there was a new bidder for the Target, Eras Capital, a private equity fund that would finance the purchase of the Target by creating a newly formed shell entity (“Buyer #2”) that would largely use debt financing to complete the deal. Eras Capital would also provide a limited guarantee and an equity commitment letter for deal certainty. The big-ticket issue for this negotiation was a reverse termination fee, which would provide the Sellers with damages equal to 10% of the purchase price of $350 million under trigger events to be negotiated by the parties.
Temple Law students Victoria and Sarah Ismael preparing for Quarterfinals with their competition day materials.
In preparing for the two Quarterfinals rounds, Victoria and Sarah negotiated twice: once as counsels for the Sellers and once for Buyer #2. The women restarted their earlier competition process and familiarized themselves with M&A deals involving private equity firms and debt financing. The Temple team then used their negotiation skills to advance their client’s interests in two final rounds against two other skillful competitor teams.
Reaching the Quarterfinals at the MAC Cup III was a tremendous victory for members of Temple’s newly founded ADRS. Victoria and Sarah learned a great deal, not only substantively but also logistically, about how to negotiate effectively in ABA Law School competitions. With this newfound knowledge, the pair hope to help coach a new team from Temple Law next year at MAC Cup IV and other ADR competitions. They were also able to hone their drafting and negotiation skills and gain tremendous knowledge about the deal process in the transactional space. Just as importantly, the two grew as a team, learning from each other’s strengths and approaches and building a partnership grounded in preparation, trust, and shared pride in representing Temple Law.
