New ABA Protocols Tackle Growing Error Risks in Remote M&A Negotiations

While the recent transition to remote work has shifted workflows in legal, there might still be some catching up to do. 

Since many mergers and acquisitions contract negotiations have become remote proceedings, there is increased potential for errors and misunderstandings between attorneys and stakeholders participating in the deal. The American Bar Association is looking to address these problems by offering a set of best practices for digital documentation protocols. The four-part protocols were released through the ABA M&A Committee on Feb. 15.

Thomas Romer, an M&A attorney at Greenberg Traurig and one of the project chairs, said that a scenario where attorneys physically enter a room to sign a contract is a rarity today. 

“The habits and processes that we do to close a deal have changed, the law hasn’t changed,” Romer said. “The ABA has a long history of developing and disseminating best practices. This is another iteration in that endeavor, to gather the best practices for virtual closings and disseminate them to the mergers and acquisitions community.”

The protocols are comprised of four guiding principles that outline how to ensure complete documents are made available to all parties before closing, how to ensure review by all parties, how to ensure the electronic transaction is legally supported, and finally, how to establish that the delivery of the completed documents is binding.

The new guidelines look to help attorneys reduce the margin of error in M&A contract processes, which have significantly grown since going remote.

The guidelines released by the ABA outline cases where remote negotiations have led to misunderstandings and incomplete closures due to rushed writing up of contracts or a lax approach to remote transactions.

“It’s a very common practice to gather signatures before the final documents are even negotiated. In fact, many of us are, up to the last second, changing words, adding things,” Romer said. “Changing things is good practice, it’s good service to the client, but [through these guidelines] we are encouraging attorneys to pause and make sure you are comfortable, and the other side has acknowledged that they have received everything.” 

Romer describes the last moments before a deal is signed as “the fog of war,” where it is possible to make errors. When a deal was being negotiated in person, the risk of an incomplete document being passed from one side to another was slim. However, when the two parties are engaging through email, the potential for a revision to get caught in someone’s outbox or fall prey to any other technological mishap is higher. 

“What we want to avoid is a scenario where somebody says after the fact, ‘Well, I didn’t see that before’ or ‘that’s not the contract I signed,’” Romer said. “It’s like if someone said, ‘We didn’t sell that land.’ It’s incumbent upon M&A lawyers to know what the contract is.”

Romer added that the latest protocols are not a one-size-fits-all or a final set of guidelines.

“This is just one way to do it, but we are saying if you follow these, then you’ve done it in a correct way,” he said.