March 31, 2011 11:50 PM

Dealmaker of the Week:
Keith Flaum of Dewey & LeBoeuf

Posted by Tom Huddleston Jr.

DEALMAKER

Keith Flaum, 47, M&A partner in the Silicon Valley office of Dewey & LeBoeuf.

THE DEAL

EBay Inc. announced on Monday that it agreed to acquire online marketing services company GSI Commerce in a deal worth $2.4 billion. 

THE CLIENT

San Jose-based eBay is the world's largest online marketplace with more than 90 million users, according to the company's website. 

THE DETAILS

EBay agreed to pay $29.25 a share for King of Prussia, Penn.-based GSI, a 51 percent premium over the stock's March 25 closing price. EBay plans to divest GSI's licensed sports merchandise business, along with 70 percent of social shopping website Rue La La and ShopRunner. Those assets will be sold and placed in a new holding company that will be led by GSI founder and CEO Michael Rubin.

Under the terms of the agreement, there will now be a 40-day "go shop" period, during which GSI will field rival bids. The deal, which is expected to close in the third quarter, would be financed with cash and debt. 

THE BIG PICTURE

Jason Helfstein, an analyst at Oppenheimer & Co., told Bloomberg this week that this deal allows eBay to better compete with companies like Amazon.

"EBay is lagging Amazon in becoming a platform for third-party sellers because Amazon has a bigger distribution network, which lowers costs," he said. The deal would give eBay access to GSI's customers--who include Toys "R" Us and the NFL--as well as extra distribution centers. 

Some shareholders already are up in arms about the deal. Investor Southeastern Pennsylvania Transportation Authority (Septa) filed a lawsuit on Tuesday in Delaware Chancery Court against eBay and GSI officials, Bloomberg reports. In the lawsuit, Septa claims that eBay's offer is a "bargain price" and that Rubin--who Bloomberg says will make more than $120 million on the sale--stands to benefit from the future prospects of the divested assets. 

THE BACKSTORY

Flaum's role as eBay's go-to lawyer on large acquisitions predates his 2009 move from Cooley to Dewey. (Arriving with him in that lateral were M&A partner Rick Climan and technology transactions partner Eric Reifschneider; both advised on this deal.) Not long after joining Dewey, Flaum took the lead on eBay's $2.75 billion sale of Skype. Recently, he's advised the company on its December 2010 purchase of German online shopping company brands4friends for $200 million.  

In an e-mail, Flaum said his relationship with eBay goes back more than a decade, as Cooley has a longstanding relationship with the company (the firm still works on litigation and securities matters for eBay). He adds that his dealwork for eBay has taken him around the world, with "the purchase of Shopping.com in Israel [in 2005] and many other acquisitions in other parts of the world, including in Germany, Israel, the Netherlands, and Scandinavia." 

ON CLOSING

On a complex deal such as this one, Flaum said it helped to work with a familiar team on the opposite side of the negotiating table that "helped us get the deal done efficiently." Morgan Lewis, Davis Polk & Wardwell, and Sullivan & Cromwell all were involved in advising different groups on the acquirer's side. Flaum said he worked with Davis Polk on multiple public company deals and recently worked with John Savva, of Sullivan & Cromwell, on online gaming company Zynga Inc.'s July joint venture with Japanese company SoftBank.

"I had recently completed another very complicated deal for Zynga Inc. opposite the lead S&C counsel--and the great relationship that we established on the Zynga deal helped on this deal," Flaum said.

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