Mergers and acquisitions (M&A) represent pivotal moments in the life cycle of any business, often marking significant growth opportunities, market consolidation, or strategic pivots. However, these transactions are far from straightforward. They are multifaceted endeavors involving intricate negotiations, legal complexities, and financial evaluations that can shape the future trajectory of a company. In this post, as part of our business tips for small, medium and big companies, we’ll explore the role of a business attorney in mergers and acquisitions.
Why You Need Legal Advice
Whether it’s a startup seeking a competitive edge or an established corporation expanding its reach, the stakes are high, and the potential risks are equally substantial. Â
A Merger refers to two businesses merging, while an acquisition is when one business buys another. These transactions can take on various structures but must be underpinned by planning, due diligence, and negotiation. That’s where a good lawyer specializing in mergers and acquisitions is required.
In San Francisco, for example, being one of the country’s leading business hubs, most companies regularly use the merger and acquisition process for growth and expansion. However, the complicated legal web of these deals can be overwhelming to navigate. That’s why, if you ever do get into this situation with your company, finding a business attorney in San Francisco is a good idea. He’ll be knowledgeable in the principles of corporate law in California and may guide companies in each stage of the merger and acquisition process.
Planning & Strategy Pre-Transaction
The first step in any M&A deal is to create a transaction thesis. Are these companies looking to strengthen their resources, expand into new markets, or get intellectual property? The business attorney assists clients in outlining the legal structure for the transaction, whether it is an asset purchase, stock purchase, or a merger.
They are also crucial in drafting and refining LOIs, or letters of intent, that outline the key terms and conditions of the proposed transaction. Business attorneys partner closely with company owners and executives to draft legal documents that further the overarching goals of the transaction while safeguarding the interests of their clients.
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Due Diligence
Due diligence is a critical step in M&A transactions. This could include deep due diligence on the financial, operational, and legal aspects of the companies in question. The goal here is to spot any liability or risk that might affect the value or form of the transaction. For more about due diligence – read this.
An attorney will assist you in conducting due diligence by reviewing all relevant due diligence documents, including financial statements, contracts, and intellectual property rights. They may also identify any red flags that could affect the deal or need to be renegotiated. In addition, the attorney also guaranteed that the transaction structure complies with local and federal regulations including but not limited to antitrust regulations and industry guidelines.
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Drafting and Negotiation of Agreements
M&A transactions have a lot of back and forth, and wide price variance; having a business attorney at the table works to your advantage. However, a business lawyer attorney’s job in this phase will be to protect their client’s interests by negotiating the terms of the transaction including purchase price, payment structure with contingencies, and any warranties or representations.
Once the terms of the acquisition are discussed and agreed upon, a business attorney will prepare all necessary legal documentation, like merger agreements, asset purchase agreements, and non-compete agreements. These gains must be watchfully made to ensure they speak to the arrangement terms and watch the buyer’s interests over the long haul.
Watch this video for some tips on drafting the agreement:
Post-transaction Integration and Compliance
The actual work for the business attorney begins after the M&A deal closes. A crucial stage once a deal is done ensures both companies agree on how operations, culture, and resources will be managed as one unit. A business attorney helps ensure that this integration process is legally compliant (i.e., there are no issues with employment, contracts, and intellectual property).
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In addition, the attorney also helps to ensure that each regulatory requirement is met, by filing any forms and reporting if necessary.
Why Does a Business Attorney Matter in M&A Transactions?
M&A deals are some of the most challenging and costliest transactions in finance. The right business attorney will always keep your interests in mind from the start to the end of the process. They can assist you in maneuvering through the complexities of acquisitions and mergers, directing you to maneuver through the legal intricacies, eliminate risk, and maximize value in the deal.
A business lawyer provides more than advice; they act like a strategist, assisting you with spotting opportunities you wouldn’t have seen otherwise. Whether you are a startup and need to scale, or if you are an established business that is exploring new avenues of growth, you need a business attorney who will help you make informed decisions and choose strategic moves.
To Conclude…
To sum up, merger and acquisition transactions are of great importance to the growth and evolution of businesses. These kinds of deals are far too complicated to be arranged without the guidance of a business attorney to ensure that they are arranged without complication, made legally, and completed without issue. This means that companies that have not yet involved external legal counsel will eventually reach a checkpoint in which they cannot proceed any further without legal help for the transaction.
Danella Yaptinchay is the managing director of Full Suite, a service company providing back end support to small businesses. She is a cofounder of Co.lab, a coworking space, and of the media company Homegrown.ph. In constant pursuit of balance and self-development, she tries to apply the practices of yoga to her daily life.
