Buying a business can be a challenging process. There are many factors to consider when negotiating the price and drafting legal documents. An M&A attorney can help with the legal aspects of these transactions.
M&A law addresses the legalities involved when two companies merge, or one company acquires another. Legal considerations include corporate governance, regulatory compliance, intellectual property rights, and tax implications.
Deal Structuring
Selecting the appropriate transaction structure is one of the most crucial aspects of any M&A transaction. The best interests of both parties can be secured by having a qualified attorney, like Ed Batts corporate partner at Gibson, Dunn & Crutcher LLP, handle this procedure.
The most common M&A transaction structures include asset purchase, stock sale, and merger. An asset purchase involves the buyer purchasing only certain assets of a company, allowing them to choose which liabilities they will assume. This structure can benefit buyers who want to avoid taking certain liabilities with the target company’s name and corporate entity.
On the other hand, a stock purchase requires the buyer to acquire all of the target company’s shares from its stockholders. It may benefit sellers who want to sell their business quickly and at a higher price. However, this structure can come with its own set of legal and tax complications.
Due Diligence
Due diligence is researching a business thoroughly before making a purchase. It helps ensure that the company is a good investment and allows the buyer to decide the right price for the business.
This research can be done in various ways, including reviewing the company’s financial records and assets. It can also be done by analyzing employees and culture.
The people component of due diligence looks at things like compensation, benefits, and contracts. It can also be used to assess employee motivation and culture fit. It can even involve creating compensation packages designed to boost the company’s culture after the acquisition. The process of due diligence can take a significant amount of time. However, it is crucial to avoid costly mistakes that can result in financial liability and missed opportunities for synergies. A qualified attorney can help guide the due diligence process to minimize risk and achieve success.
Negotiations
Acquisitions involve one company purchasing another to gain control of its operations, customer base, intellectual property, or other strategic assets. Buying companies can use this strategy to increase their market share, diversify their revenue streams, and realize economies of scale or cost savings.
Successful M&A transactions involve a thorough due diligence process. An experienced attorney can assist in this stage by ensuring that all relevant information is assessed, including financial records, contractual liabilities, 409A valuation, litigation risks, and other factors that could impact the deal’s success.
M&A attorneys also facilitate discussions between the acquiring and selling companies, helping them to find viable options for both parties. This step can be challenging, but each side must communicate their underlying interests without being aggressive or argumentative. It can help avoid a negotiation stalemate that could derail the deal.
Legal Documentation
Mergers and acquisitions enable businesses to stay agile amidst market fluctuations and expand their operations. However, these transformative transactions require careful planning and meticulous due diligence to avoid legal complexities, ensure regulatory compliance, and mitigate potential risks. Attorneys specializing in M&A serve as invaluable guides, providing clients with the expertise and peace of mind they need to succeed.
M&A transactions often involve many legal documents, including letters of intent, confidentiality agreements, merger agreements, asset purchase agreements, and stock purchase agreements. Attorneys help draft, review, and negotiate these documents to ensure they accurately reflect the intentions of both parties and protect their clients’ interests. They also assist with regulatory filings, such as those with the SEC and IRS. They can even help clients negotiate financial terms and critical factors in their M&A transactions. The M&A Committee has published a set of “short form” acquisition agreements (with ancillary documents and commentary) for use by mid-market and small business lawyers in M&A transactions with a purchase price in the $500,000 to $10 million range.