In-House Counsel

INVESTORS SEEK LEGAL EDGE

By Hanna

Unlike accounting where numbers are tallied in tidy columns and finance where formulas generate rates of return, the law offers no such precision in quantifying its impact on business profitability.  But just because the connection is tough to quantify doesn’t mean it doesn’t exist, or that it’s not worth tapping.

A recent article points out how courtroom intelligence is being used by sharp investors, particularly hedge funds, to hone their competitive edge:

Litigators have often been called in to evaluate the investment impact of a patent conflict during the course of due diligence for an acquisition.  Now hedge funds are moving earlier and faster.  They are putting lawyers in the courtroom to report on the outcome of a trial as it is happening.

Take William ackman, of Pershing Square Capital Management, for example.  Ackman didn’t own any Ceridian stock prior to October 2006 when Stored Value Systems Inc. (an electronic gift cart firm and unit of Ceridian Corp.) squared off against rival Barry Fiala Inc. over an injunction and a patent dispute that threatened the sustainability of SVS.  Yet, Ackman’s acquisition of Ceridian stock tracked the day-by-day progress of the trial until he announced owning 11.3% When the jury returned a verdict in favor of Ceridian the stock rose.

For more examples of how the law impacts business profitability and how your business can cash in see The  Business Guide to Legal Literacy: What Every Manager Should Know About the Law (Jossey-Bass, 2006).

Full post as published by Legal Literacy on May 11, 2007 (boomark / email).