Exit Engineering

Authors

Rachel Landy, Benjamin N. Cardozo School of LawFollow

Publication Date

Fall 2023

Journal

New York University Journal of Law & Business

Abstract

How do business lawyers create value? For nearly forty years, scholars have conceptualized the business lawyer as a “transaction cost engineer” who helps contracting parties efficiently break negotiation stalemates to create more valuable deals. This theory provides meaningful insights about sophisticated corporate law practice, where outside lawyers parachute in to make one-off deals happen. However, it fails to explain the behavior of startup lawyers, who develop long-term relationships with their clients and counsel them on seemingly routine matters, well before a major transaction materializes. These lawyers are not just transaction cost engineers, they are exit engineers.This Article offers a novel theory of startup lawyers who create value by anticipating issues that could arise in an exit transaction—an acquisition or an IPO—and helping their clients address those issues proactively. The exit engineering startup lawyer future-proofs clients against the long-term consequences of commercial transactions that they might otherwise neglect because of inexperience or short-term pressure to get deals done.Startup lawyers minimize the costs of exit transactions and make deals happen that might otherwise fail, enabling more efficient use of the parties’ resources. In turn, this facilitates reinvestment into the broader technology ecosystem; profitable liquidity events enable VCs to fund more enterprises and innovation. Successful exit transactions lead to more, new successful ventures.

Volume

20

Issue

1

First Page

27

Last Page

93

Publisher

NYU School of Law

Keywords

entrepreneurship, technology, corporate, contracts, startups

Disciplines

Commercial Law | Contracts | Law | Law and Society

Recommended Citation

Rachel Landy, Exit Engineering, 20 N.Y.U. J.L. & Bus. 27 (2023).
https://larc.cardozo.yu.edu/faculty-articles/809