Legal project management: planning and scoping
In the first article in a two-part series, Antonin Besse explains how project management tools can be used to manage complex legal transactions, focusing on planning and scoping the project.
At first sight, the worlds of project management and commercial legal transactions appear completely alien to each other. To a lawyer, project management conjures up images of lean production, infrastructure projects and gantt charts, a far cry from the sophisticated analysis, bespoke drafting and delicate negotiating involved in a commercial transaction. However, a lot of the thinking behind project management is about breaking up complex tasks involving many players into manageable elements and phases (see box "Project phases"). It is also about planning ahead, communication and learning from experience. If these ways of thinking and the associated tools become integral to a law firm's way of operating, increased profits will not be far behind.
This article, the first in a two-part series on legal project management, looks at the planning and scoping phase of a project.
A useful project management tool, known as BOSCARD (which stands for background, objectives, scope, constraints, assumptions, risks and deliverables), can help transaction lawyers to design project implementation documents. These are well thought-out descriptions of a project aimed at communicating its essential elements to the stakeholders and obtaining their buy-in. Several BOSCARD elements can be found in properly drafted pitch documents, engagement letters, heads of terms, structure papers and other documents familiar to lawyers.
In the commercial lawyer's world, the BOSCARD framework can be used at the start of a transaction either as a helpful personal tool for planning ahead or as a skeleton for a full structure memorandum to be prepared with the input of, and circulated to, all of the departments and lawyers involved in the deal. In either case, its preparation will help to iron out many resourcing, feasibility and timeline issues. It will assist in briefing the different key players (including team members and stakeholders) and in uniting the deal team (as preparing the memorandum will be a collaborative task). In my view, all transaction lawyers should be taught the importance of planning by being encouraged to think through a transaction using the BOSCARD framework.
Taking the example of acting for a company, C, in a complex cross-border restructuring, the background section of a BOSCARD planning memorandum should describe the relevant facts to show an understanding of C's business, and outline the proposed transaction.
This section should state the objectives of the transaction and demonstrate an understanding of its business rationale. In the given example of C, the objectives might be to:
Negotiate (and, if necessary, force onto creditors) a reduction in C's existing debt.
Simplify C's financings and capital structure.
Both objectives will require extensive discussions with very disparate groups of creditors with different objectives; for example, banks, bondholders and hedge funds, some of which may have bought their debt at a discount and be looking to make a quick and substantial return. Persuading other important stakeholders of the benefits of the transaction may also be required for successful implementation of the objectives.
Scope can be broken down into the following sections:
The firm's role and resources. C may want its advisers to lead the transaction and to seize the initiative from the start. This would mean taking on a deal counsel role requiring:
Good leadership, teamwork and co-ordination skills.
Planning strategy, structure and timeline.
Preparing a term sheet and transaction structure paper to present the restructuring proposal to creditors and other stakeholders.
Planning a negotiation strategy and leading negotiations.
Planning a litigation strategy to deal with the dissenting or holdout creditors.
Dealing proactively with regulators.
Drafting the documents.
Driving the transaction to a successful conclusion, including orchestrating a very complex closing.
The memorandum will need to address those points and to describe the resources that will be made available throughout the firm, the principal team members and the correspondent firms that will be involved in specialist areas or countries where the firm does not have a presence.
Structure of the transaction. The memorandum should describe the transaction and its various stages. It should contain a timetable, with the various stages of the transaction broken down into milestones. It should also describe the strategy for negotiating with creditors and other stakeholders, and the litigation strategy for dealing with holdout creditors.
Multidisciplinary and cross-border scope. The transaction would involve many different specialists (for example, corporate, capital markets, finance, litigation, insolvency, employment and tax specialists) across several jurisdictions.
The key constraints to be addressed in planning this transaction are:
The timescale, as C is likely to want the restructuring wrapped up in weeks.
The limits on the firm's resources and the ability to work effectively across different departments and jurisdictions.
Holdout creditors, which may make it impossible to achieve unanimous agreement.
The number of jurisdictions involved requiring input from, and co-ordination with local counsel.
The complexity of the new capital structure.
The complexity of the new documents.
Limits on the ability of C's head office staff to cope with the scale and complexity of the transaction.
The memorandum should state several assumptions, which clarify the scope of the firm's role and risks, and will justify a renegotiation of any fee in case of "scope creep". They should include, among other things, assumptions:
That the structure of the transaction will not change significantly.
About the firm's role, areas of specialisation and the international offices that the firm will involve in the transaction.
That the timeline of the transaction will not change significantly.
About the allocation of tasks and responsibilities between the firm and C's legal and finance teams, the financial adviser and C's accountants.
About where negotiations will take place, and travel.
The memorandum should list the risks that may materialise and affect the realisation of the objectives, the transaction structure, the negotiation strategy, the timeline and the need to resort to litigation. It should also address economic risks (such as tax, other transaction costs and pension issues) and indicate the impact that those risks might have on fees.
Deliverables fall under the following three headings:
The firm's role. The services that the firm intends to deliver and its role in the transaction (see "Scope" above).
Documents. The documents needed to implement the transaction, most of which the firm will draft as lead counsel, could be listed in an appendix to the memorandum with a timetable and allocation of responsibilities. The principal terms of each document should, ideally, be described in term sheet format.
Fees. The memorandum will contain a fee estimate (or a cap, if that is what C requires), which can be presented in a variety of ways but should contain a clear headline total and a breakdown by workstream and project milestone.
Antonin Besse is a consultant to the legal services industry specialising in transaction management and cross-border integration. He is a former partner of Freshfields Bruckhaus Deringer LLP and is qualified both as a solicitor and a French avocat.
The project cycle can be divided into four phases: plan; do; check; adjust (or review). This breakdown was made popular by Dr W Edwards Deming, known as the father of modern quality control. His ideas are applicable to all processes involving production, whether in manufacturing or services. An extra phase, observe, is often added at the beginning. For a lawyer, this would involve understanding the client and investigating the business rationale, the transaction objectives and the available precedents and know how.
The philosophy behind the phases emphasises the first and last phases as much as the middle phase of "do". This may seem counterintuitive to a busy transaction lawyer, raised on the traditional approach of: draft; produce; deliver; sign. But how many lawyers can deny that, with a bit more planning upfront, that last transaction would have stayed within budget or, if a proper post-transaction review had taken place, that client relationship would be better?