March 14, 2004


As you know, there is some debate out there in “deal land” as to the value of requiring the other side’s counsel to provide your client with a legal opinion. At the suggestion of one of our readers we decided this year to start tracking in our Study (see below for the Study parameters) the percentage of times that legal opinions were required in transactions. Our 4th Annual Deal Point Study (hot off the presses and just presented at The University of Texas Law School’s Securities and Business Problems Conference in late February) indicates that legal opinions were required of seller’s counsel in 68% of the transactions we reviewed and required of buyer’s counsel in 49% of those transactions. Are we surprised? Not really, and anyone who tells you that opinions are merely standard operating procedure would appear to be blowing the proverbial anecdotal smoke…

Next year, we plan to slice and dice this legal opinion analysis a little more to gauge, for example, the nature of the consideration paid in the transaction. For example (and just one of many), a recipient of equity as a portion or all of the purchase price might be realistic in insisting that purchaser’s counsel provide a legal opinion. Although, as you think about it, because our study is comprised of public acquirers the purchaser could reasonably argue that any opinion their counsel might give is just expensive window dressing to already fairly extensive public information. Conclusion? None. Still, the unsliced and undiced percentages do appear to indicate that legal opinions are not necessarily SOP.

4th Annual Deal Points Study Parameters: We reviewed acquisition agreements relating to public company acquisitions of private companies with transaction values of between $25M and $150M (pulled from the LiveEDGAR M&A Database).

(Comments? Gripes? Pls feel free to email us: or )