Mike Egan

THE MAN BEHIND THE HAWKS DEAL

Atlanta Business Chronicle
April 2 - 8, 2004
Meredith Jordan
Staff writer
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The $250 million sale of the Hawks, Thrashers and Philips Arena on March 31 started last September with a phone call from Rutherford Seydel to Atlanta attorney Mike Egan.

No rookie to big-time sports deals, Egan and his partner at King & Spalding LLP, Ray Baltz, had represented Arthur Blank when he bought the Atlanta Falcons in February 2002.

Of the dozens of lawyers, accountants and others involved in the Hawks/Thrashers deal, it was King & Spalding that served as "Switzerland."

"We were the neutral party, the party representing the deal" to Seydel and the eight other buyers who formed Atlanta Spirit LLC and closed on the deal seven months later.

Blank says Egan's skill is problem-solving and coming up with ways to solve issues, unlike some lawyers who point out what is wrong with a deal.

"There have been other transactions we've looked at, a variety of opportunities, and we've always asked Mike to be involved in those opportunities," Blank said. "We like his thinking from a business perspective."

Egan said the sheer number of parties involved in the Hawks/Thrashers transaction made it tougher than the Falcons deal. "An issue would come up [with the Falcons transaction] and I could call Arthur and he could make a decision. This took a lot more coordination."

But in many ways, the Falcons deal helped pave the way for Egan, a mergers and acquisitions partner. Although he had a lot of big deals under his belt, Blank said, Egan did not have experience in the sale of professional sports teams. "I had a lot of faith in Mike Egan," he said, explaining why he selected him.

"They did an outstanding job for us," Blank recalled. "It wasn't just good legal advice, it was good business advice."

The transaction to acquire the football team offered its own intricacies, since it involved five siblings and the sale of a family business, Blank said. But there are numerous other parallels.

The National Football League, like the National Basketball Association and the National Hockey League, have strictly adhered-to policies, Blank noted. "When you transfer a franchise, there are very special rules and regulations that have to be followed."

The sports franchises have their own way of approving team sales. The corporate offices of both the NBA and NHL send out information packages to each team owner when a sale is proposed.

Since each of those leagues has 30 different franchises, 30 packages went out in each league. Each franchise was required to vote. In the end, there were 60 unanimous votes that came back in favor of the deals. The 30 NBA team owners approved the sale on March 12. The 30 NHL team owners approved the sale March 29.

Nine buyers, nine phone numbers

In addition to Seydel, Atlanta Spirit is made up of Michael Gearon Jr., Michael Gearon Sr., Steve Belkin, Bruce Levenson, Ed Peskowitz, Todd Foreman, M.B. "Bud" Seretean and Beau Turner. Beau Turner is the son and Seydel the son-in-law of Ted Turner, who oversaw the acquisition of the Hawks by Turner Broadcasting System Inc. during his tenure there. The Thrashers joined the NHL as an expansion team for the 1999-2000 season.

"There were daily conference calls. Sometimes they would have conference calls [linked through the law firm] without either of us being on it," Egan said.

"They would tell us, 'We don't need you, but can we use the conference line?' " recalled Baltz, laughing.

King & Spalding had a host of attorneys involved in the deal, ranging from bond counsel (because of the $142 million in bonds secured against the Hawks franchise), tax counsel (because of numerous issues arising around taxation), partnership law counsel surrounding the relationship of Atlanta Spirit and real estate law (because of physical assets of the teams and the arena). Atlanta law firm Lawson, Davis, Pickren & Seydel, the firm of one of the buyers, handled certain other real estate issues.

The sellers, TBS and parent company Time Warner Inc. (NYSE: TWX), had in-house counsel in Louise Sams and John Cooper, as well as a law firm representing the company in New York, and both the National Basketball Association and the National Hockey League each had counsel, although they used the same law firm.

Frantic beginning

It all started on Sept. 2, with the phone call from Seydel. "He said, 'I'm thinking about buying the teams,' " Egan recalled. "Within a day, it became clear he was serious."

Sams, then inside counsel to TBS and now president of international operations for TBS, and a friend of Egan's dating back to their high school years at The Westminster Schools in Buckhead, suggested Egan because of his experience with the Falcons. Blank said he also recommended Egan to Seydel.

The 10 days following Seydel's phone call to Egan were a whirlwind of all-nighters, takeout and catered food, and frantic negotiations, all centering around the 46th floor conference rooms. "Those were true all-nighters, sending out documents between 2:30 a.m. and 4 a.m., and coming back in at 9 a.m. to get the response from Time Warner's lawyers in New York," Baltz said.

To the outside world, Texas millionaire David McDavid was the sole member of the short list of buyers of the Atlanta teams. For months there had been news reports of his plans to obtain financing and acquire the teams and the arena.

Only the people immediately involved in the negotiations knew otherwise, Egan said. "It was a very secretive process of the law firm partners and Turner folks, going back and forth in meetings for nine straight days." Neither Egan or Baltz had anything to do with the McDavid negotiations.

But while the big issues got pulled together during the first 10 days with Atlanta Spirit, the details took months to play out, Baltz said.

The biggest issue that had to be addressed likely was the restructuring of the Atlanta Spirit partnership. It shifted the amount of ownership interest between the three partners slightly. Baltz recalled standing on the back deck of his home, talking with Levenson, one of the buyers, during the Super Bowl on Feb. 1.

"He was having a party at his house, and I was having a party at my house," Baltz recalled. "While our families and guests were enjoying the game, we were working it out on the cell phones." They both missed the first half of the game. "Bruce and I joke that we're the martyrs of the deal," Baltz said.

There were numerous challenges in bringing the deal together. Part of that was due to the corporate ownership of the Hawks, Thrashers and Philips Arena. At the outset, the sale involved "extricating the teams and arena out of the Turner organization," Egan said.

That's more complicated than it may sound. Issues varied from team employees being housed at CNN Center to whether the doors to Philips Arena, which abuts CNN Center, would remain open and accessible during games. Parking decks also had to be negotiated. There was even discussion about whether the Warner Bros. characters, such as Bugs Bunny and Scooby Doo, would continue to parade through games.

The deadline called for in the agreement was March 31, according to someone familiar with the contract.

On the Saturday before closing, March 27, Egan was jogging through the heart of Buckhead clad in a Falcons T-shirt. Seydel, who happened to be driving by, saw him.

Seydel pulled over and got out his Blackberry to send Egan a quick e-mail. "Nice running stride," it read. "I'm going to send you a Thrashers jersey so next time you can be wearing the appropriate team."

Reach Jordan at mjordan@bizjournals.com.