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Law360 Features Michael Rennock in Q&A

October 12, 2011

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Law360, New York (October 11, 2011, 3:13 PM ET) -- Michael J. W. Rennock is a partner in the New York office of Steptoe & Johnson LLP. He is a transactional attorney whose practice focuses primarily on corporate finance and securities, mergers and acquisitions, corporate governance and private equity/venture capital. He represents companies, investors and investment banks in a variety of financing transactions, including public offerings and private placements of equity and debt securities.

He represents public and private companies in a wide variety of industries, including telecommunications, wireless communications, electronic data transmission,defense, retail, healthcare, child care, banking, energy and transportation. He regularly advises buyers and sellers in both public and private mergers and acquisitions, asset sales, and other divestitures. He has worked on convertible and high-yield debt financings, Rule 144A offerings, leveraged buyouts, recapitalizations, project financings, spinoffs, secured and unsecured borrowings, and joint ventures.

Q: What is the most challenging transaction you have worked on and what made it challenging?

A: A couple of years ago I represented a private equity buyer and its partner in the purchase of the assets of the Hartmarx Corporation under §363 of the Bankruptcy Code. Although the total consideration for the transaction was only $128 million, this transaction was challenging in several respects.

First, the sale was originally structured to take place through an auction process. After some skillful maneuvering, my client was selected as the stalking horse bidder, and we were able to negotiate some of the standard protections accorded to stalking horse bidders. Emerging as the successful bidder enabled us to attack the next set of challenges, namely financing the purchase.

Hartmarx had an existing syndicated credit facility that had to be replaced or refinanced. The transaction occurred in the summer of 2009 when the credit markets were still exceedingly tight. After substantial negotiations with several lenders, we ultimately ended up rolling over the existing facility.

Another challenge was the negotiation of the equity arrangements. Our clients were a U.K. private equity firm and a publicly traded Indian corporation, each of which played different but essential roles in structuring, guiding and funding the transaction.

The final challenge was logistical. I was basically the quarterback of a legal team that consisted of attorneys from six of our offices to address the corporate, bankruptcy, labor and employment, intellectual property, tax, real estate, immigration and antitrust aspects of the transaction.

Q: What aspects of your practice area are in need of reform and why?

A: One of the regulatory reforms included in the Dodd-Frank financial reform law is a requirement that private equity funds that manage more than $150 million in assets register with the Securities and Exchange Commission by March 30, 2012. In addition, the registration requirements for advisers to private funds have also been changed based on the amount of assets under management; larger and mid-sized advisors that rely on exemptions in the state in which they have their principal place of business are required to register with the SEC unless an exemption from registration is available, with smaller advisers required to register at the state level. In light of these recent, substantive changes to the private equity practice area, I think we need to monitor their implementation and effectiveness before proposing additional regulatory reforms.

Q: What is an important deal or issue relevant to your practice area and why?

A: Recent amendments to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 that were generally designed to reduce the overall filing burden and expedite the filing process will actually increase the reporting burden on private equity funds and other similar investment vehicles. The two principal additional obligations relate to documents required to be submitted and information the "acquiring person" must provide regarding its “associates.”

Item 4 of the revised HSR form now requires certain additional documents to be submitted with the HSR report, such as confidential information memoranda and bankers’ books, regardless of whether such documents satisfy the competition criteria of section 4(c).

Items 6 and 7 of the revised HSR form require the "acquiring person" to provide information regarding its “associates.” Previously the form only required information from the ultimate parent entities of the parties to the transaction and data on any entities they control. The inclusion of “associates” is designed to capture all entities under common operational or investment management with a filer. The analysis of which entities to include will increase compliance time and may have implications for structuring future funds.

Q: Outside your own firm, name an attorney in your field who has impressed you and explain why.

A: The private equity landscape has expanded dramatically over the past 10 years and, not surprisingly, so has the number of corporate practitioners that have moved into the field. Consequently, there are any number of superb private equity attorneys, both in New York (which is still the deal capital of the world) and across the country. One lawyer who consistently stands out as not only a solid advisor but also an innovative thinker in the private equity field is Frank Aquila of Sullivan & Cromwell. In addition to handling a significant number of high-profile transactions, he has written or co-written more than a dozen articles on practical topics in the field over the past two years alone.

Q: What is a mistake you made early in your career and what did you learn from it?

A: As a mid-level associate, I was part of a team that represented a private equity firm in its first IPO of a portfolio company. By that time, I had worked a number of successful IPOs and other public securities offerings, so I was fairly comfortable handling most of the transaction. One of my assignments was to negotiate the firm’s legal opinion on behalf of the issuer. Although I was experienced in securities offerings, I had not previously been responsible for the deal opinions.

To further complicate matters, the partner representing the underwriter took it upon herself to negotiate with me. She was shrewd and initially persuaded me to give several opinions that my firm could not give. The partner in charge of the deal was not pleased when I presented the opinion to him. He insisted that I renegotiate several of the requests and explained (a kind characterization) to me how I had been snookered. The experience impressed upon me the importance of understanding the substance of every aspect of a transaction and keeping my eye on the big picture.

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