Mediation in corporate transactions – genius or barking mad ?

As a commercial solicitor with some 30 years experience who is now also an accredited mediator, I recognise that, on first consideration, the suggestion that mediation could and perhaps should be used on corporate transactions may seem a little off the wall, when mediation is generally used in litigious situations and whilst increasingly popular in

Home » David Swede » Mediation in corporate transactions – genius or barking mad ?

As a commercial solicitor with some 30 years experience who is now also an accredited mediator, I recognise that, on first consideration, the suggestion that mediation could and perhaps should be used on corporate transactions may seem a little off the wall, when mediation is generally used in litigious situations and whilst increasingly popular in litigation, it’s still far from mainstream.

However, as many clients will attest, corporate transactions, such as buying or selling assets or joint ventures can all too frequently get bogged down by delay and extra costs when an impasse is reached.

Taking the example of a business sale, the seller’s solicitor will generally try and avoid, on the seller’s behalf, giving many, if any, warranties, whereas from the buyer’s point of view they will push for as many strong warranties and possibly indemnities as possible.

Whilst it shouldn’t happen, egos can come into play, both between solicitors and possibly  clients. In a transaction which is perhaps worth £100,000.00 or less, any delay or continued arguments, correspondence or drafting back and forth can add a considerable amount to the costs of the transaction which in turn can make the overall costs disproportionate to the underlying value, resulting in clients who are unhappy with their lawyers, rightly or wrongly. The lawyers may then counter, with some justification, that even if a client does not see the commercial need or risk of taking an entrenched position, the lawyer must do so to protect his or her position from being sued later.

As can be seen by the above, the whole process can become very inefficient, frustrating and contentious and possibly lead to a client perception that lawyers are simply trying to earn more fees.

So, perhaps a solution might be to mediate any difficult issues with an experienced commercial mediator ?

It is a common feature of the type of transactions described above that matters can be delayed because solicitors sit in their own offices drafting correspondence and letters. With mediation, it is common for all the parties, including a mediator to be in face to face meetings with a clear time limit on seeking to resolve outstanding issues. A skilled mediator should also be able to draw out, in common sense terms, what the underlying fears or commercial concerns are of the parties or their lawyers and to explore those in a sensible way without acrimony.

David Swede - head of commercial law department
David Swede – head of commercial law department

In short, might it be possible to save considerable time and money in bringing in a mediator at a point where a transaction is stalling ? If issues cannot be resolved by a single day mediation, it should be clear whether there is a significant and genuine legal issue or an unresolvable personality issue and at the very least, further time and effort will not be wasted.

 

David Swede

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