The Talent

July 9, 2009 5:57 PM

Dealmaker of the Week: Peggy Brown of Skadden Arps

Posted by Brian Baxter

Peggy Brown

For the third-straight time, a woman has nabbed our top weekly dealmaker honors.

Skadden, Arps, Slate, Meagher & Flom's Margaret "Peggy" Brown follows in her fellow partner N. Lynn Hiestand's dealmaker footsteps for her role advising Hopkinton, Mass.-based data storage firm EMC on its $2.4 billion acquisition of Data Domain.

EMC emerged as the new owner of Data Domain, which makes de-duplication storage systems, after a month-long, back-and-forth bidding war with data systems rival NetApp.

So what exactly is de-duplication and why was the competition between EMC and NetApp so spirited?

As our own Ross Todd reported a month ago when writing about the deal, Data Domain discovered a way to identify duplicate files as they're being stored, which greatly reduces the amount of space needed to store such files. The innovation caught the attention of NetApp and EMC, both of which cater to companies that analyze, protect, and store large amounts of data.

In late May, NetApp and its outside lawyers at Wilson Sonsini Goodrich & Rosati thought they had completed a $1.5 billion acquisition of Data Domain in a cash and stock bid that valued the company at $25 per share.

Then things got interesting.

"After that, EMC considered its options and decided to make a topping bid," Brown says. "We sent our first bid letter to Data Domain on June 1."

EMC's all-cash bid valued Data Domain at $30 per share. NetApp responded by upping its cash-and-stock bid to $30 per share to match the EMC offer, which Brown says enabled Data Domain's board to hold to its position that the NetApp deal was the preferred transaction for the company.

Data Domain was precluded from negotiating with other parties because of its signed merger agreement with NetApp, Brown says. But that agreement did contain some specific exemptions. One was a requirement that any party Data Domain wanted to speak with had to execute a standstill agreement, which would preclude them from moving forward on an unfriendly basis.

Brown says EMC was not prepared to sign the standstill agreement, so the company's lawyers needed to orchestrate a process that would allow it to proceed without engaging in discussions with Data Domain.

"We were working towards a goal where Data Domain would terminate its agreement with NetApp, which they could only do to enter into an agreement with us," Brown says. "So they had to be in a position to sign an agreement with us without ever talking to us."

That took some finesse. Brown says EMC had to be as direct and clear with Data Domain as possible, delivering a signed agreement to Data Domain so the company could "sign the signature page and send it back to us so we could have a deal."

On Monday EMC presented what would turn out to be its final all-cash bid valuing Data Domain at $33.50 per share. NetApp announced on Wednesday that it had ended its efforts to acquire Data Domain. The company will receive a $57 million breakup fee as part of its original merger agreement with Data Domain.

Brown says that EMC didn't take out deal protection for its final bid, allowing Data Domain to continue negotiating with third parties. EMC included no breakup fee in its last offer should someone come in and top the bid. (Click here for an analysis of EMC's strategy by The New York Times's Deal Professor.)

Data Domain was advised by Fenwick & West chairman Gordon Davidson in Silicon Valley, while Wilson Sonsini M&A partners Steven Bochner, Nathaniel Gallon, and Michael Ringler advised Sunnyvale, Calif.-based NetApp. (Bloomberg reports that NetApp itself might become a takeover target after its failed Data Domain bid.)

Brown, the managing partner of Skadden's Boston office, is quick to deflect credit for the winning Data Domain bid to the rest of her deal team at the firm, as well as to EMC's in-house lawyers. Brown was assisted by Skadden associates Andrew Kopans, Alain Dermarkar, and Rachel Pfeiffer Bee and EMC general counsel Paul Dacier and senior corporate transactions counsel June Duchesne.

"It's pretty unusual for in-house lawyers to be as active in deals as [Dacier and Duchesne] are--they were there every step of the way," Brown says. "It really was a team effort by the legal team at EMC and Skadden."

Brown says Skadden has worked on some of EMC's most significant transactions over the past several years. She should know, having been named a Dealmaker of the Year by The American Lawyer in 2008 for advising on the $1.1 billion IPO of VMware, a developer of virtualization software owned by EMC. At the time of the August 2007 offering, which saw EMC sell a 10 percent stake, VMware was the largest technology IPO since Google's in 2004.

Having worked through the Fourth of July holiday, Brown is looking forward to putting the Data Domain deal to bed. EMC's tender offer for the company expires next week and Brown expects the deal to close shortly thereafter.

"This really was a really interesting transaction," she says. "We were as surprised as anybody else that this happened yesterday."

Recent Dealmaker Profiles

N. Lynn Hiestand of Skadden Arps, 6/26/09

Alison Ressler of Sullivan Cromwell, 6/19/09

George Panagakis of Skadden Arps, 6/5/09

Matthew Guest of Wachtell and William Fogg of Cravath, 5/15/09

David Lakhdir of Paul Weiss, 5/8/09

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