Lexpert Magazine

LEXPERT MAGAZINE | NOVEMBER/DECEMBER 2016 11 LEXPERT: is is an industry not well- known to the layperson. Can you explain what Lydall does, and what Texel does, and how quickly this market is growing? Chad McDaniel (General Counsel, Lydall, Inc.): Many of Lydall's products are a part of our everyday lives … but hidden in plain sight. Our products generally fit into two categories. First, we make thermal and acoustical products for vehicles that serve a critical role in providing heat and noise abatement. Second, we manufacture non- woven filtration/separation products that improve air and liquid quality in com- mercial and industrial settings, along with insulation for extreme temperatures. ... While we believe most of the industries in which we operate will continue to benefit from increased volumes, we see the biggest potential in the automotive, liquid filtra- tion and geosynthetic segments. LEXPERT: Lydall is a big NYSE-listed com- pany. Texel, with 300 employees, is a pri- vate company based in Québec that began in 1967 by making bed blankets. What was it about Texel that caught Lydall's eye? McDaniel: Texel was aligned with our longstanding objectives of diversifying our needle-punch expertise into attractive applications, acquiring complementary manufacturing technologies and creating meaningful scale; with Texel, Lydall is now among the top 10 nonwoven manufactur- ers globally. e industries Texel serves supplement Lydall's focus in filtration/sep- aration engineered materials. Also, Texel has a great reputation and a deep culture of growth, innovation and quality. Combin- ing all of these qualities makes Texel and Lydall an exceptional strategic fit. LEXPERT: Were external counsel newly hired to execute this deal, or did they have a long history with their clients? McDaniel: I'm lucky to work at a company that values the role of the general counsel. e CEO and his leadership team consid- er me more than just a legal advisor; they look to me as a business partner in both a strategic and operational capacity. So, I was part of early meetings with Texel and participated in each management presen- tation that followed. Once the basic terms were agreed and a letter of intent signed, I hired outside counsel. Aer soliciting the recommendations of two US-based firms with which I have worked in the past, the decision to engage Stikeman Elliott — and John Leopold, specifically — was easy. John Leopold (Stikeman Elliott LLP): ank you, Chad, for the kind words. We are very Woven Together fortunate to have excellent relationships with a number of US-based firms and law- yers, as a source of business referrals. And it is always especially pleasant when it affords us an opportunity to work with first-class, sophisticated M&A folks like Chad and the management team at Lydall. LEXPERT: What was the focus of negotia- tions? Was it just price, or were other ele- ments just as important? McDaniel: In every M&A deal there is a typical set of elements that are oen the focus of the negotiations, [including] price, liability limitations, etc. is transaction was no exception. One area both parties focused on was structuring the transaction in a way that maximized tax efficiencies for both parties. In the end, as in any deal, both parties gave a little and we were able to come to a structure that, in the aggregate, benefited both parties from a tax perspec- tive. is is an area in which Stikeman's tax attorneys were very helpful. Leopold: If I had to pick a few [elements] that stood out in this deal, there was of course the tax structuring, as Chad men- tioned, but that also played into discussions around the approach to signing and closing the deal. Lydall had a preference for sign- ing and closing simultaneously, but Texel, as a private company, understandably had a concern about reaching out to third par- ties for consents and authorizations before having deal certainty. It was also a deal in which Texel had to juggle the interests and dynamics involved in having a disparate group of shareholders, including founders, related parties and institutional investors. LEXPERT: Was there a moment that stood out for you, perhaps something unusual? And was language ever an issue? McDaniel: As trivial as it may seem, picking the project name oen provides the oppor- The Lydall-Texel deal stitches together different but complementary manufacturers INTERVIEW BY SANDRA RUBIN Chad McDaniel General Counsel, Lydall Inc. John Leopold Stikeman Elliott LLP (for Lydall) ON THE DEAL In July, Lydall completed its acquisition of Texel Technical Materials, strengthening Lydall's position as a global provider of filtration and engineered materials. Here, the lead in-house and external counsel explain how a large US firm producing specialty engineering products successfully merged with a much smaller company from French Canada that began by making blankets 49 years ago.

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