Ventures

Crafting a Deal — and a Relationship — with a Leading Japanese Homebuilder

It all started with an out-of-the-blue phone call.

Last year V&E partner Mike Saslaw was sitting in his office in Dallas when he received a call from someone he had never met, a senior investment banker named Kurt Andersen. Andersen, a Managing Director at Falls River Group, a boutique global investment banking firm specializing in mergers & acquisitions, was looking for a Dallas-based corporate attorney to represent Sumitomo Forestry America, the U.S. subsidiary of a Japanese housing and wood products company.

Little did Saslaw know at the time that he would go on to represent Sumitomo on its largest ever U.S. acquisition and establish a unique relationship along the way. Saslaw led a team of V&E attorneys in advising Sumitomo in its purchase of three key businesses owned by Charlotte, N.C.-based Crescent Communities, an operator and developer of residential and commercial mixed-use projects. The deal closed this past July.

Sumitomo — Japan’s third largest private landowner — has rapidly expanded its U.S.-based residential real estate business in recent years. Up until recently, the Japanese company focused largely on buying single-family homebuilders. By acquiring Crescent, Sumitomo diversified into the multi-family side of the business and gained entry into the Southeast’s fast-growing apartment and office markets.

“Crescent has been in the development business for a very long period of time and it has a very good reputation,” Saslaw said.

From a legal standpoint, the deal was notable for another reason: Crescent had a complex ownership structure that required negotiations with multiple parties. Successfully consummating the deal also involved a complicated due diligence process as well as ensuring that the Crescent Communities management team remained on board. In spite of the challenges, Saslaw and his team were able to navigate efficiently and effectively.

“Mike’s got a very deep team to draw on, and he was able to bring people on as needed without it getting out of hand, without being inefficient.”

Gaining Sumitomo’s legal work

Nailing the representation in the first place required jumping through some hoops.

Last year Atsushi Iwasaki, president of Sumitomo Forestry America, decided that Sumitomo needed to enlist a second law firm to handle its transactions. He instructed Andersen to start looking in Dallas where the company had relocated its headquarters from Seattle.

Andersen, who has provided buy-side advisory services to Sumitomo for more than four years, was cognizant of the caliber of law firm needed to complete complex transactions for Sumitomo. Andersen and Falls River Group are part of one of the world’s most successful global M&A partnerships known as IMAP. Through his domestic and international contacts, Andersen was able to develop a list of top law firms in Dallas based on referrals from his colleagues. That led him to V&E, and ultimately to Saslaw.

One of Dallas’ leading corporate lawyers, Saslaw has more than 35 years of experience, including handling a number of transactions for Stockholm-based private equity firm EQT Partners and for Trimble (NASDAQ: TRMB), an advanced positioning technology solutions company.

After his initial phone conversation with Andersen, Saslaw was added to a list of about eight potential legal hires. After further due diligence, the list was narrowed down to three lawyers whom Iwasaki personally interviewed before deciding to go with V&E.

“Mike has vast experience working on transactions and negotiating with sellers,” Iwasaki said.

Getting the job done

Soon after being retained, V&E started to work on the Crescent deal. The complexities of the transaction quickly became apparent. Luckily, Saslaw was able to tap a full service V&E team from across practice areas to get the job done.

In financing its multi-family business, Crescent had struck multiple joint venture agreements with various institutional investors. As a result, V&E had to negotiate not only with Crescent’s primary owners, private equity firm Anchorage Capital Partners and hedge fund MatlinPatterson, but also with numerous joint venture partners and project lenders as well.

On top of that, the seller had retained two law firms, one that had historically represented Anchorage Capital and MatlinPatterson, and another that historically had represented Crescent Communities.

“The business was rather complicated because the multi-family business was largely financed through 28 joint ventures with different major institutions including insurance companies, hedge funds and the like,” Saslaw said. “Our real estate and finance lawyers were much more involved than they would be in a typical M&A transaction.”

The due diligence process was likewise a complicated effort due to the various types of properties owned by Crescent.

“There were really three distinct kinds of construction businesses, each with their own idiosyncrasies from a due diligence standpoint and each with their own idiosyncrasies in terms of potential deal structure,” Andersen said. “Mike’s got a very deep team to draw on, and he was able to bring people on as needed without it getting out of hand, without being inefficient. They did a very nice job of managing the process.”

Saslaw also helped Sumitomo fulfill a key objective: retaining Crescent’s management team.

“One of their attorneys in the employment arena worked with Atsushi and I on quite a number of conversations, along with Mike, nailing down the employment contracts for the senior executives that we needed to get under contract,” Andersen said.

Iwasaki noted that he was impressed by the level of responsiveness of V&E senior associate Elena Sauber who assisted Saslaw in managing the deal.

“You would ask for something and get a response very quickly,” he said. “That was very important.”

A relationship built on past results

In the end, the V&E team helped Sumitomo pull off a successful acquisition in an efficient manner.

“In spite of the numerous consents and the complexity, we were able to close the transaction within roughly two months of signing,” Saslaw said. “Sumitomo entrusted us with their biggest transaction to date, and we are extremely pleased that it worked out so well.”

It could just be the beginning of an ongoing relationship. With Sumitomo committed to exploring future deals, Saslaw has reason to believe there will be more work to come.

“I keep on working on transactions,” Iwasaki said. “When something comes up, I will definitely speak to Mike again.”