What does a mergers and acquisitions lawyer do? | Montague’s Law
When two business entities combine, having a M&A lawyer on your side ensures a smoother process. They offer legal support and an experienced hand, ensuring that both parties adhere to the stipulations of the law. Using a business lawyer also ensures that the merger or acquisition avoids legal and financial pitfalls while finding its place in the niche market.
What does an M&A lawyer bring to the table? In this article, we’ll take a closer look at this fascinating area of law, looking specifically at the role of the mergers and acquisitions lawyer (M&A lawyer) in streamlining the process.
Essential things to know about mergers and acquisitions
Mergers and acquisitions (M&A) happen all the time in Florida and across the country. Businesses grow and adapt, and this growth sometimes leads to collaborations in hopes of increasing profits or expanding goods and services.
Mergers and acquisitions lawyers manage a branch of business law that oversees the legal aspects of one entity joining another. Their missions cover areas such as the purchase transaction, the creation of the new commercial identity and the integration of employees. They also advise on the new company’s operational practices in terms of the state-specific legal framework.
Before going into the details of the role of an M&A lawyer, we need to understand the key features of this business strategy. Here are five considerations:
1. Mergers and acquisitions take time
Mergers and acquisitions take time to materialize. In Florida, finalizing these deals can take four to six months on average, and that’s just the initial transfer. The time frame also depends on the urgency of the buyer and seller and how effectively both parties perform the due diligence.
Another complication could be the seller’s ability to attract interest from multiple bidders. In this case, the assistance of a reputable M&A lawyer is invaluable. Parties may also find it helpful to use a legal representative who can put them in touch with other professionals, such as investment bankers and financial advisors.
A mergers and acquisitions lawyer advises buyers or sellers on how to resolve potential delays in the process, including:
- Regulatory requirements, such as the Hart-Scott-Rodino Antitrust Improvement Act
- CFIUS (Committee on Foreign Investment in the United States)
- Rights of third parties
- Contract approval
2. M&A valuations are always negotiable
One of the main advantages of employing a company that specializes in this area is the confidence it offers to the buyer or seller. For example, a business’s offer price and valuation amount are always negotiable, and fair prices should consider factors such as:
- Valuation of the company at the last financing round
- The prices that startup investors and employees have paid in recent stock sales
- The Company’s Latest 409A Valuation by Independent Assessors
- Past Financial Performance
- Projected growth
- The experience of the management team
Even if a proposal seems fair, it is common practice to present a counter-offer more in line with what you are considering for the merger or acquisition. Buyers rarely offer consummate prices in the early stages of negotiation; they expect a reasonable counter-offer.
3. Buyers will do their due diligence and sellers should anticipate it
A buyer must undertake due diligence in a merger and acquisition. They should want to know what they are buying, what obligations they will assume when they buy the business, any contingent liabilities. They should also educate themselves on litigation risks and intellectual property issues.
This due diligence is particularly important in acquisitions of private companies which are not subject to the same level of scrutiny as public contracts. There may not be relevant information about the company from public sources, so research is crucial.
A private company looking to sell must ensure that its books, contracts and records can withstand scrutiny from any potential buyer; details matter. Items such as signed board and shareholder minutes or resolutions, signed employee documents, and audited financial statements should be readily available.
4. Intellectual property details are important
An important step that every selling company should anticipate is to prepare a review of the company’s intellectual property and documentation for the buyer. The buyer can then confirm that the agreed value is correct. It also confirms that the seller has the right to current and future intellectual property in the legal sense.
- Buyer will review general licensing and control provisions, revealing certain risks buyer may face as a new owner.
- The seller’s intellectual property status can also affect the price the buyer will pay for the acquisition. For example, if a license is terminated due to a change in control, the buyer can request a price reduction. If the seller does not accept it, he can cancel the transaction.
5. Employee and benefits issues are sensitive
Employee and benefits issues are difficult issues to manage during a merger and acquisition. Emotions can blur the lines, but objective legal advice can help the decision-making process. Related questions sometimes cover:
- Accelerating payouts to management and key employees
- Restricted shares issued by the seller
- The processing and payment of outstanding employee stock options
- Retention agreements
- Conditions of employment for all new hires
- Dismissal of existing employees after closure
- Cancellation fees and responsibilities
- Non-Disclosure Agreements (NDAs)
- Problematic employment contracts to manage for the buyer
The solutions aren’t straightforward, and advice from a mergers and acquisitions lawyer can ensure a smoother transition.
How do M&A lawyers facilitate the process?
An outside attorney is essential to navigating the appropriate areas of law, including:
- Data Privacy
- Antitrust Laws
- Compensation and Benefits Laws
- Real estate lawand
- Employees matter.
Mergers and acquisitions are complex, fast-paced and usually contentious. Skilled attorneys know how to oversee the process and guide the parties through the realities of merger agreements. They also advise on strategies that will make the overall structure of the acquisition agreement more plausible.
A lawyer who specializes in mergers and acquisitions who has worked on previous transactions is likely to be more effective. A thorough knowledge of the law means that the lawyer can also act as a skilled negotiator, adviser and drafter. They will serve as a point of contact and:
- Anticipate the pitfalls
- Communicate with relevant parties
- Collect information and documentation in a timely manner
Relying on the expertise of mergers and acquisitions lawyers also leaves the company free to manage the operations and forget about the long negotiations. The lawyer must also:
- Find the other business entity
- Oversee discussions on price and terms,
- Draft Memorandum of Understanding and Letters of Intent documentation, and
- Review all purchase contracts and agreements.
A buyer or seller of a business must ensure that they comply with state, federal and securities laws, which can be a complex and risky process for strangers. Having a lawyer to guide you through these laws and help you comply builds confidence that you are covering all of your legal bases. Some transactions require unique documents, such as due diligence memoranda, non-competition agreements, and confidentiality agreements, which a mergers and acquisitions attorney will prepare. They also prepare the business for the transition, including advice on shareholder rights and fiduciary obligations under the new arrangement.
The primary duties of a M&A lawyer will also include efforts to:
- Identify business objectives
- Conduct due diligence and investigations of the other party
- Map out the process, including a realistic timeline
- Advising buyers and sellers on fiduciary duties and shareholder rights
- Identify the legal issues of friendly mergers and hostile takeovers
- Determine tax and financial implications or restructuring
- Explain the risks and how to avoid them
- Guide negotiation tactics
- Consult with antitrust attorneys to assess regulatory hurdles and approvals
- Seek third-party consent from lenders or other stakeholders
- Advise whether to negotiate further or pursue another agreement
- Write and revise the agreement
The M&A lawyer can also help you sign a deal, publicly announce the deal, and close the process.
When should you hire a mergers and acquisitions lawyer?
It would be a mistake to wait to hire a lawyer specializing in mergers and acquisitions when closing the deal. The process is much simpler by using these services in the early stages. Corporate lawyers assist sellers and buyers through all aspects of the complex legal landscape of a merger or acquisition, ensuring full focus on a successful closing.
It is wise to counter risk by setting up a potentially profitable business transaction in the right way. Without an attorney to guide the process, minor mistakes or even negligence can taint these efforts or derail the transaction completely.
Whether you are buying or selling, you are taking the next step towards your future. Having an M&A lawyer behind you every step of the way helps you navigate the process comfortably and inspires confidence that your future is in good hands.