Optima Law Group specializes in assisting our clients with all legal aspects of their mergers and acquisitions. A merger occurs when two companies combine into one entity while an acquisition takes place when a company purchases another company. We’ve seen many different outcomes, successes and obstacles throughout theses processes and would like to offer the following advice to a company considering a merger or an acquisition.
Make sure your corporate records, contracts, and other documents are in order prior to due diligence: If your company is being acquired or merged, all this will be disclosed during due diligence. Best to make sure all is in order ahead of time so you do not have to scramble to fix problem areas during the transaction and risk looking unprepared, unprofessional, or overvalued to the other party.
Identify the optimal structure for the deal: There are many ways to structure a transaction. Work with your legal and tax advisors to identify the optimal structure possible for maximum financial benefit and minimal risk. The earlier the better.
Perform thorough due diligence on the other party: Due diligence is your chance to gather all necessary information about the other party not only for practical purposes in carrying out the transaction, but also to make sure you are comfortable with the other party and there are no skeletons hiding in their closet.
Make sure your management team maintains its focus through the entire process: During a merger or an acquisition, it is essential that management does not lose focus on the company’s day-to day operations. A manager’s time is often stretched thin during the process but it is essential to not let the current company’s operations slide.
Recognize geographic challenges: If the two companies’ headquarters are located in two different countries, this could result in language barriers, along with varying performance motivators and legal differences. It is important to recognize these obstacles so strategies can be put into place to deal with them.
Identify cultural differences: If two companies have varying cultures, such as flexible work schedules, communication policies, dress code polices, etc., this can create problems during a merger or acquisition. Again, it is important to distinguish these differences so they can be dealt with early in the process.
Involve key personnel from the early stages: It is important to involve key personnel early in the process, including human professionals who are tuned into the companies’ cultures and talent pools. However, timing is critical and will depend on the circumstances. It is also a mistake for a company being acquired to let the cat out of the bag too early in the process.
Take an intellectual property inventory: The seller needs to provide the acquirer with complete list of its IP property, including patents, trademarks, licenses, software, third party contacts, domain names, social media accounts, etc. since these are some of the most valuable assets and can drive much of the valuation of the deal.
Hire proper consultants and an experienced legal team: it is essential to hire the proper consultants and legal team during a merger or acquisition since a company’s business leaders may not possess the specialized knowledge or skills necessary to successfully guide the company through the process. A merger or acquisition can also feel like a second job due to the time required. Allow your team to shoulder some of the load. Involve them early before a Letter of Intent (LOI), Term Sheet or other preliminary document is in place so all the necessary issues are addressed for as smooth a transaction as possible.
Make sure the final deal documents are on point: Excellent deal documents will carry out the parties’ intent and agreement on all key issues, but also serve as a roadmap for the future.A year after the transaction is complete and a dispute arises as to a liability, milestone payment, or the like, the deal documents should clearly spell out to the parties what is supposed to happen. Clear deal documents will help prevent litigation and hard feelings down the road.
If you need help with a merger or acquisition, please contact Optima Law Group at 858-964-4697 or firstname.lastname@example.org and we can assist you through the entire process.