The Talent

December 19, 2008 5:45 AM

Dealmaker of the Week: Steven Tonsfeldt

Posted by Julie Triedman

When Steven Tonsfeldt agreed to represent Foundry Networks last spring to help the network-switch maker respond to an expected bid by rival Brocade Communications Systems, he took it for granted that his firm, Heller Ehrman, would be there to back his effort.

That assumption, obviously, was not the only one to be proved wrong this fall. Brocade announced that it completed the deal this morning, and the agreement Tonsfeldt helped craft now stands as one of the few large, finance-dependent tech deals announced before the credit crisis to actually make it to the finish line. And Tonsfeldt, who coheaded the corporate department at the now-defunct firm, may finally have a chance to catch his breath--and to find a new firm to call home.

Brocade announced its formal bid for Foundry in July. But by early September, the financial world turned upside down, leaving a spate of broken deals in its wake.

As Foundry's stock price slipped by nearly a third and Brocade's by nearly half over the next few months, Tonsfeldt estimates that he and Foundry's board met more than 15 times to hash out their next step.

Brocade's plans to finance half the acquisition with debt--$1.5 of the original $3 billion bid--also grew increasingly shaky in October. As Brocade worked to nail down financing, Tonsfeldt helped the Foundry board push back a shareholder vote twice. That gave the two companies time to come to an amended merger agreement: under that agreement, announced in November, Foundry agreed to accept $400 million less for the company.

During the same time frame, life at Heller had turned upside down as well. In late summer, more than a dozen Heller lawyers were punching time on the deal. But on September 26, Heller voted to dissolve; from then on, in addition to his Foundry advisory work, Tonsfeldt worked overtime to find a law firm home for Heller's corporate practice.

One of those firms was Cooley Godward Kronish, which, coincidentally, was heading up Brocade's merger effort.

On October 3, a large portion of the West Coast corporate group went to Cooley. But Tonsfeldt, who had led the effort to merge his former firm, the Venture Law Group, with Heller five years earlier, was not among them. Instead, he and a young partner, Kristin Kercher, stayed behind in the dissolved firm's nearly empty Menlo Park office, while around them a skeletal administrative staff tended to final bill collection and file-forwarding tasks.

To keep all the deal-related balls in the air, Tonsfeldt quickly enlisted as cocounsel Foundry's main outside litigation counsel at DLA Piper. DLA lawyers offered support in areas like tax and executive compensation. At the end of October, Tonsfeldt and Kercher decamped to White & Lee, a 15-lawyer boutique transactional firm in Silicon Valley founded by Mark White, a law school classmate of Tonsfeldt's.

Two days after Foundry's shareholders approved the deal, Brocade said that the two companies now had enough financing and cash in place to seal the deal by Thursday. The announcement came before the opening of the trading day on Friday.

Thanks to Tonsfeldt's help, the deal has been a rare success story. According to a study released Thursday by the independent technology industry analyst company The 451 Group, only 32 tech deals worth $1 billion or more got done this year, compared with 80 last year.

As to Tonsfeldt's future plans? "Really, I haven't even had time" to think about a next move, he says.

Dealmaker of the Week
is published Fridays in The Am Law Daily

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Tonsfeldt is a great lawyer, and a mensch. I am certain his steady, calm, clear-headed approach helped keep the deal on track. Good for him.

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