An interview with Mathew Saur, co-founder of law firm Woolery &Co.

James Woolery and Mathew Saur founded the Woolery & Co. PLLC law firm to serve as a strategic advisor to corporations, families and institutions.

Tell us about your role at Woolery

Both my co-founder Jim and I started with the thesis that there was an opportunity in the market for a service provider that drew on a broad set of skills and backgrounds. I spent some time running M&A at Scientific Games in Las Vegas when Ron Perelman owned it, which was a bit on the law side, and Jim ran M&A as an investment banker at JP Morgan, as an example. We have business and legal backgrounds, and our clients wanted something where we could really put those to work.

The big firm models, they’re great and, I’m talking big banking, big consulting. But they do have their shortcomings, unintentionally, where they can’t sit with a client over a year span, and really play for whatever the outcome when the client sees a value situation. Take a law firm, a lot of them are billing by the hour. It’s hard for them to go off that model and say, “we’re going to spend real investment time with this client over the next year because we know that we’re going to be able to drive an outcome that will have value for our firm and the client at the end.” We can do that. And that’s what we try to do.

So, I always tell people that we are somewhere between law, banking, and consulting, depending on the client. A lot of them look at us as the quarterback on the front end to help develop an idea or strategy and then help them quarterback with bringing in the pieces, like our partners at all the banks or all the big law firms.

How have activists’ priorities and engagements changed in recent periods?

The overall numbers have been lower. It’s emblematic of the environment right now, where there just isn’t a lot of deal activity. The market is full of uncertainty with the rate environment and supply chain issues all over the place. Valuations, I think, are still a little out of whack and dislocated from where they should be based on the environment. You’ve seen activists take a different tack. There are definitely ones that are pushing for low hanging fruit on the M&A side or low hanging fruit on the operational side.

But you’re also seeing activists get involved more with ESG in terms of ESG being at the forefront of a campaign, like the Engine No. 1 campaign at Exxon. There have been others since then that have been both publicly and privately pushing for those types of wins. It’s changing the lens on what’s considered a win and how to drive value versus what maybe used to be the case when the market was hot and you could push somebody in M&A very quickly, when the M&A market was robust.

How do you define “hostile” M&A?

I always view hostile M&A, obviously, as a subset of M&A. And I would say there’s no hard and fast rule on what’s hostile. It’s one of those things where you kind of know it when you see it, because any contentious negotiated deal could be deemed hostile, and that could be parties that want to get a deal done. But when most people talk about hostile, it’s where the target company doesn’t necessarily want to sell, or they don’t want to sell to the buyer that is at the table pushing for the deal in that specific transaction. It could be that somebody that just comes over the top with an unsolicited offer for a company, but it also could be a situation where deal negotiations have fallen apart.

We’ve seen it all over the place. You’ve gone down the path, you’re friendly, and you’re pushing toward a deal, and for one reason or another, the deal falls apart. When the buyer still wants to pursue the company and is willing to keep pursuing it in the face of a board or a management team that may be resistant to that transaction, that’s where you see the hostile term really thrown around. And that could dovetail with activism, where you have an activist pushing, and then they either have a private equity firm lined up to do a hostile takeover, or they push somebody into the market that otherwise doesn’t want to be there.

Name one of the the most hostile M&A campaigns you have been involved in?

We represented Darwin Deason, and the takeover of Xerox and then Xerox’s subsequent takeover attempt of HP. I would say that combination of deals because they happened in a relatively short amount of time. Xerox was going to do a deal with Fujifilm, and they had announced it. Deason was the second largest holder of Xerox, and he sold his company ACS back in 2010 to Xerox, so he had a big, vested interest in that transaction. Carl Icahn was the largest holder of Xerox, had some board seats, and had been making noise prior to that. The deal got announced and it was not the greatest deal from our perspective. We, being Jim and I, and on behalf of Darwin, launched a litigation to block the Fuji Xerox merger here in New York, and then simultaneously ran a proxy fight to take over the board with Carl Icahn. And we were able to successfully get a first-of-its-kind injunction in New York on the merger and then subsequently took over the board.

Shortly after that, for anyone that knows that print industry, there’s a thesis out there that consolidation is needed because it’s kind of a melting ice cube, and scale helps. So, what we did at Xerox was we went after HP, probably the biggest competitor in the space. They were a bigger company at the time and launched a takeover attempt that happened right into the teeth of COVID-19. I always say that if we had the shareholder annual meetings during COVID-19, we would have won that, and the landscape would have been different. But HP was able to cancel their meeting for obviously good reason, due to COVID-19, and we dropped the takeover attempt. So, we ended up moving away from it, but that combination was day-in and day-out a knife fight. And I don’t know how you can get any more hostile than that period of time that we were dealing with there.

Given rising interest rates and market volatility, could M&A and capital allocation activism see a significant shake-up in 2023?

I think so and you’re seeing that a little bit with the rate environment. There’s probably a little bit of an opening up still to happen in the market before we really see M&A start to take hold. People just need clarity on deals and where that environment is going before they are starting to take bets. But there’s plenty of capital in the system.

The other piece to that is there are a lot of would-be target companies, and I’ll use that term broadly, that are looking at the environment. We’re seeing this across the board on our clients and our relationships and the bankers and lawyers that we’re talking to around companies that would have otherwise been in the pipeline to be sold, or they could have been a great target for an activist to push somebody to be sold. There’s still this dislocation and evaluation that is important to actually consummate M&A deals. Obviously, if you have someone breathing down your neck, your dashboard is a little different than if you’re doing a negotiated deal.

You have noted your surprise at the time it took for the anti-ESG activism movement to take rise. Why?

I was surprised. I thought it would take hold much sooner. I think you have seen widely reported that the ESG space has been at the forefront for the last decade of capital allocation and corporate governance in public and private companies all over the world, particularly in the U.S., with BlackRock being the big example.

I always viewed that as a political plus policy game. If you look at the actual political world and the policy world, there’s left, there’s right, there’s center, and there’s all these different factions and for a period there, you didn’t see that in the corporate governance landscape. I’m using air quotes when I say, “the right faction”, the non-ESG faction was always just cast as intrenched management that wanted to focus on profits versus other things. But there were no real robust vocal capital allocators that were pushing that and now you’re seeing that catch up.

This interview featured as part of Insightia’s Beyond The Boardroom podcast hosted by Kieran Poole. For more in the series, listen on Apple and Spotify.