The following is an excerpt from Practice Perspectives: Vault's Guide to Legal Practice Areas.
Duane McLaughlin, Partner—Debt Finance
Duane McLaughlin is a partner in Cleary’s New York office. His practice focuses on debt financing transactions and mergers and acquisitions.
He regularly represents private equity funds and their portfolio companies and NYSE- and Nasdaq-listed U.S. and non-U.S. companies, focusing on bank financings and capital markets debt issuances. Duane has extensive experience in acquisition financing transactions in both the high-grade and leveraged markets, and he has been involved in a number of transactions in Latin America.
Duane’s wide-ranging work for clients has been recognized by IFLR 1000, Latin Lawyer, The Legal 500 Latin America, and The Legal 500 U.S.
Duane received his J.D. in 1998 from Columbia Law School. He clerked for Judge Denise L. Cote, U.S. District Court, Southern District of New York, from 1998-1999. Duane joined Cleary Gottlieb in 1999 and became a partner in 2007.
Describe your practice area and what it entails.
While I advise on a variety of corporate and disclosure matters, I specialize in debt financing transactions. The core of my practice is acquisition financing, which is a specialized area that is highly integrated with the rest of a mergers and acquisitions transaction. At the time the acquisition agreement is entered into, we typically enter into commitment letters so that the commercial terms are set, and the debt financing will be available when the acquisition is closed. Between signing and closing, we negotiate the actual financing documents.
Another part of my practice is working with other types of debt financing for a variety of borrowers, including portfolio companies of private equity sponsors and large strategic borrowers.
I spend a lot of my time providing general corporate counseling, which I find is a good way to maintain and build client relationships by having daily or near-daily contact with most of my clients. This advice covers my core areas of focus, but also covers securities law, disclosure, compliance, and corporate governance issues.
What types of clients do you represent?
I do work for private equity sponsors and their portfolio companies, as well as other corporate clients of all sizes. In the last year, I have done work for a number of different private equity sponsors, including Brookfield, Carlyle, Fortress, and TPG.
I have several corporate clients that I started working for when I was a summer associate, meaning that I have worked for these clients for more than 20 years, including FEMSA and Coca-Cola FEMSA. I have worked almost as long for Codelco and Copa Airlines.
Through acquisition financing work, I also tend to work for new clients every year, including, recently, Western Digital, Cushman & Wakefield, and Cohu. I enjoy building long-term relationships with clients, which is both personally satisfying and the key to building a successful practice.
What types of cases/deals do you work on?
I spend most of my time doing acquisition financing transactions, which is a dynamic and varied area. In the early stages, the key is to get the capital structure right and make sure the debt financing dovetails as perfectly as possible with the rest of the transaction. Market conditions, contractual issues in the acquisition agreement, or—often—regulatory issues can have an important bearing on how the financing is structured.
Prior to signing the acquisition agreement, structuring a process to maintain competitive tension among the debt financing providers is key to getting the best possible commercial terms for the client. During this time and through closing, the focus shifts to making sure the terms of the debt financing work well with the business, do not create the risk of foot faults, and are not overly restrictive.
At closing, the focus is on getting all of this papered correctly. These types of transactions often involve some of the most complicated contractual arrangements in corporate work. And closing is often only the beginning, particularly for new borrowers or issuers, as there is a significant education process for clients to be able to comply with their new debt documents.
How did you choose this practice area?
My career has coincided with a significant growth in debt-financed acquisitions and the leveraged loan market. This practice area requires lawyers to have substantive legal knowledge across several areas, stay up to date on developments in different debt instruments, and have the ability to advise on both legal and commercial developments. While I did a variety of work as a younger lawyer, I seemed to gravitate naturally to acquisition financing and other types of debt-financing transactions. I was fortunate enough to work on some of the largest acquisition financings in the U.S. and cross-border financings in Latin America. I also liked the opportunity that an acquisition transaction presents to build a broader relationship with a client and provide ongoing financing and general corporate and disclosure advice, so it was a natural choice for me that occurred over time.
Even as I have focused my practice, however, I have always tried to keep up with developments in corporate governance and disclosure in order to help the clients for whom I have provided this advice for many years.
What is a typical day like and/or what are some common tasks you perform?
My day consists of three different types of activities. First, I interact with clients every day on pending transactions, and I answer general questions they have or discuss transactions they are thinking about doing. It often involves legal issues outside of my core practice, which is when I bring in my colleagues from different practice areas at the firm.
Second, I spend time each day with the teams on my deals. I tend to be the most involved in the early stages of a deal, when I may review and comment on every turn of the main documents. As the deal progresses, and depending on the seniority of the associates I am working with, I delegate more to the associates and try to hand over to them leadership in the process, following up frequently to discuss key substantive or procedural issues. I really enjoy doing the actual legal work and supporting associates in their roles.
Finally, I spend a good part of each day staying up to date on market or legal developments as they relate to my practice.
What training, classes, experience, or skills development would you recommend to someone who wishes to enter your practice area?
The most important thing is that you really have to like rolling up your sleeves and doing real legal work, as the documents in our deals are often highly complex. You also have to have good written and oral communication and people skills from the beginning, as these types of transactions involve extensive interaction with other lawyers at the firm, clients, and opposing counsel at all levels. Finally, you need to be curious. There is a fair amount of business, accounting, and market information that you need to learn over time that you can only really do deeply by reading newspapers and industry publications about debt financing. We provide a lot of training at the firm, and there are many general training resources available to get young lawyers started, although this isn’t an area that law school can specifically prepare you for.
What do you like best about your practice area?
I like the variety and unpredictability that come out of my particular practice, as well as work that is both complicated and highly dependent on market conditions. I never know what is going to happen on a particular day. I also like working closely with our mergers and acquisitions lawyers and lawyers in other practice areas at the firm. Changes in the business cycle also profoundly affect what I do. For example, I spent 2007 working on the acquisition of Alltel, which was one of the largest buyouts in history; I spent 2008 working on the acquisition of Lehman Brothers; and I spent 2009 on a variety of restructuring transactions. When the debt markets reopened after the credit crisis, I resumed my core practice of acquisition financing, although how deals are done had changed a bit since the pre-crisis boom.
What is unique about your practice area at your firm?
We are not a big group, but we do cover a lot of ground. We tend to focus on representing borrowers or issuers of debt, but we work for both private equity sponsors and strategic buyers and for both the highest credit quality borrowers and leveraged borrowers. We are also a pretty young group with a growing business, and lawyers of all levels of seniority can have the opportunity to play a role in the development of the firm’s practice and client base.
What are some typical tasks that a junior lawyer would perform in this practice area?
One of the nice things about our practice is that the variety of work involved allows junior lawyers to play different roles in the transaction. Early in the deal, our junior lawyers take the lead in understanding the existing capital structure and any contractual impediment to putting the new financing in place. They also have a key role to play in analyzing proposals from potential debt providers and getting banks on the same set of terms. Finally, through closing, the junior lawyers have opportunities to draft different documents and coordinate the closing process. In this area, junior lawyers really have a high level of involvement and the greatest exposure to clients later in the deal.
What has been the most surprising aspect of dealmaking to you?
I really still enjoy getting deals done for clients. I feel lucky that I get to work on transactions that I find interesting and allow me to continue to learn and develop as a lawyer even after 20 years of practice. I also like meeting a new group of young lawyers each year who are trying to decide on a practice area and having the opportunity to influence their development and get them interested in debt financing.