Mergers and Acquisitions

Businesses buy out other companies to grow or gain a competitive advantage. Sometimes the interest is in entering new markets, and other times the interest is in buying out the competition. Whether the buyer is offering a deal that the seller can't pass up or the sale is driven by necessity -- relieving the seller from the struggle of maintaining a failing business, a lot of money exchanges hands.

According to PricewaterhouseCoopers, some of the largest negotiated deals top $5bn. With sums this high, these transactions come with potentially significant legal risks and tax implications in tow. Regardless of the size of the transaction, it is critically important for both sides to have experienced counsel involved. A qualified M&A lawyer can help your business navigate an M&A while minimizing your risks and ensuring there will be no future disputes over the transaction.

What Can a Lawyer Help With During an M&A?

From start to finish, a lawyer can provide diligent, accurate preparation and review of all documents. As you work your way through an M&A, you'll want to steadily ensure that the deal the other party promised you verbally remains intact on paper. Only a qualified and experienced M&A attorney can cut through the legalese in formal contracts to ensure your interests are well protected.

Do not wait to hire a lawyer. When informal talks turn serious, a reputable M&A lawyer can make your transaction official with a letter of intent. While the Letter of Intent is non-binding, it is generally the first step in brokering a deal to buy or sell a business and sets the major expectations of each side. From this step through due diligence and closing, an M&A lawyer can handle the legal side of transaction.

What to Expect During an M&A

The M&A process can be lengthy. Most deals take approximately six months from the first talk of negotiations to the final closing. A great M&A lawyer has patience with the process. At Krogh & Decker, LLP our knowledgeable and experienced M&A attorneys can guide you through the process with ease.

1. Negotiations: The initial conversations determining price, concessions, and value are collectively called negotiations. These talks are not legally binding, but they require strategic decision-making. Hiring an M&A lawyer before any details are agreed upon can help you better understand your risks and opportunities. Additionally, it is essential to secure a non-disclosure agreement prior to providing any confidential information or documents to the other side. Our firm also works closely with the client's CPA to ensure that the proposed structure of the transaction is the best possible from a tax perspective.

2. Letter of Intent: A verbal agreement of terms is generally followed with a letter of intent (LOI) which is a non-binding written agreement between the two parties. LOIs vary in length, but are intended to set forth the major deal points or expectations of the parties, subject to further negotiation and refinement.

3. Initial Due Diligence: Once a deal is in the works, the buyer begins the process of due diligence. This is a detailed process of verifying, investigating, or auditing the business being purchased to validate the deal represented by the seller. For certain deals such as mergers and reorganizations both sides of the transaction will need to complete due diligence on the other. The majority of legal disputes after a transaction has been completed involve allegations of non-disclosure, so it is important that this step be documented and handled carefully.

3. Purchase Agreement: Once the details are verified, a formal contract with the offer is prepared and executed. This is a legal binding agreement to pursue the M&A, ultimately leading to a 'closing' of the transaction. The transaction itself may take many different forms, from a reorganization, a merger, an exchange of assets for stock, or other variations. Along with the main transaction agreement, there are also usually related documents, including bills of sale, employment contracts for key personnel, and lease assignments.

4. Additional Due Diligence: Additional due diligence needs may occur after the purchase agreement is signed. An M&A legal team will continue to work through the steps necessary to verify the details of the offer and compliance with all contracts.

5. Disclosures: This step takes a closer look at fact-specific information supporting the seller's representation of the deal. This is where a buyer will need a detailed eye to verify that all claims regarding profitability and viability are accurate.

6. Closing: This is where the deal becomes official, the transaction is final, and money exchanges hands. Depending on the nature of the transaction the closing may be followed by submission of necessary securities exemptions to state and federal agencies.