August 19, 2011 6:00 AM
Dealmaker of the Week: Ethan Klingsberg of Cleary Gottlieb Steen & Hamilton
Posted by Tom Huddleston Jr.
Correction: 8/19/11 11:00 a.m. EDT—The original version of this story inaccurately described Ethan Klingsberg’s role in advising Google on a proposed deal with Yahoo in 2008 and omitted the name of Cleary Gottlieb Steen & Hamilton transactional IP partner Leonard Jacoby, who was part of the firm’s team on the Motorola Mobility acquisition. That information has been corrected in the eleventh and thirteenth paragraphs below. We regret the errors.
Ethan Klingsberg, 47, M&A partner in the New York office of Cleary Gottlieb Steen & Hamilton.
Google, the Mountain View, California–based technology giant.
The $12.5 billion purchase price translates to $40 per Motorola Mobility share, a 63 percent premium over the company's August 12 closing price. Upon completion of the deal, which is expected to come no later than early 2012 assuming it gets regulatory and shareholder approval, Motorola Mobility will continue to operate as a separate business unit within Google.
The agreement between the two companies includes hefty fees on both sides should the transaction collapse. If antitrust regulators block the deal, Google has agreed to pay Motorola Mobility a $2.5 billion reverse termination fee, The New York Times notes. If Schaumburg, Illinois–based Motorola accepts a rival bid, it will pay Google $375 million.
A team from Wachtell, Lipton, Rosen & Katz is advising Motorola Mobility on the matter.
Klingsberg's team is working closely with an in-house Google team that includes chief legal officer David Drummond, deputy general counsel Donald Harrison, and M&A legal director Christine Flores.
THE BIG PICTURE
Following the acquisition, Google, which makes the market-leading Android mobile software, will assume control of one of the mobile industry's strongest patent portfolios. Google chief executive Larry Page said in a blog post that the purchase will allow the company to better compete with rivals such as Apple and Microsoft. Page also predicted that the Google-Motorola combination will "supercharge Android" and boost competition in the mobile market.
In July a six-company consortium led by Microsoft and Apple outbid Google to buy more than 6,000 Nortel Networks Corporation patents for $4.5 billion at a bankruptcy auction. (Cleary bankruptcy partner Lisa Schweitzer advised Nortel on that sale.)
Cleary's first assignments for Google were antitrust matters. Klingsberg says the company was specifically attracted to the firm's European antitrust practice group, which is technology-focused and has respresented several clients in antitrust actions against Microsoft. The relationship with the European lawyers eventually led to Cleary doing antitrust work for Google in the United States and, ultimately, to a meeting six years ago between Klingsberg and Drummond.
Klingsberg says that he and the firm's M&A group slowly built a relationship with Google executives over time. He first advised the company on control and termination fee aspects of its abandoned advertising deal with Yahoo in 2008. Cleary has done at least 15 M&A deals for Google since then, Klingsberg said.
This deal's challenges included crafting a tax-sharing agreement under which Motorola Mobility would release tax information related to its spin-off from Motorola Inc. to insure that the split wouldn't adversely affect the acquisition, Klingsberg says. Meanwhile, Cleary's antitrust team, led by partner David Gelfand, performed the due diligence to prepare the deal for regulatory scrutiny. Transactional IP partner Leonard Jacoby led the firm's efforts in advising on the intellectual property assets that are at the heart of the deal.
According to Klingsberg, working through the myriad challenges—and doing so quickly—has required the in-house and outside legal teams to be closely in sync. That's not always possible when large law firms advise companies as famouly cutting-edge as Google, he notes. (Sibling publication Corporate Counsel recently named Google legal team the Best Legal Department of 2011.)
"Their [in-house lawyers are] very detail-oriented, but very fast-paced . . . they're also fearless," Klingsberg says. "It's easier for a big law firm to meld with someone who's very deferential, or just wants to outsource or wants to do things [in a] very old-fashioned way, and these guys are neither."
That wasn't a problem in this case, Klingsberg says, because the Cleary and Google lawyers have spent plenty of time getting to know one another—making the Motorola deal what he calls "a great culmination" of a years-long effort.
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