Mergers and Acquisitions Lawyer
M&A stands for mergers and acquisitions, which refers to strategic transactions in which companies consolidate or one transfers its ownership to the other. In a merger, two independent companies combine to form a new legal entity.
On the other side, an acquisition occurs when a company purchases another company. In an acquisition, a business entity gains control of another one by the purchase of its stock or assets. Mergers and acquisitions are used strategically to improve the performance of a company by saving on production costs, gaining market power, and acquiring new skills or technology. Corporate law and finances are fundamental to mergers and acquisitions for these will determine the profitability of the business transaction and how to conduct the M&A process. Our friends at Motiva Business Law explore the ins and outs of mergers and acquisitions law below.
What Is Mergers And Acquisitions Law?
M&A law refers to the legal framework and regulations that govern the purchase and sale of businesses. It involves a range of legal issues including due diligence, contract negotiation, regulatory compliance, and post-merger integration. A myriad of business transactions, which are a part of the M&A activity, involve legal aspects.
These transactions include:
- Tender offers
- Leveraged buy-outs
- Management buy-outs
- Joint ventures
- Strategic alliances
- Corporate restructurings
M&A lawyers guide clients through the M&A process, address the legal requirements, and ensure that the transaction is structured in a way that is favorable to their interests.
The Role Of Law In M&A
The M&A process comprehends a series of legal, tax, and regulatory implications that need to be addressed by a business attorney. Some legal activities that take place in a business transaction are the following:
- Deal structure: According to the nature of the transaction, parties will have different rights and obligations, and the legal procedures to follow will vary. An asset acquisition will bring different liabilities than the ones of a stock purchase, and these concerns will be addressed by a corporate lawyer.
- Contracts: From the beginning of the M&A process, the buyer and the seller need to settle agreements and dictate the terms of the transaction. A legal counsel intervenes in these formal documents, covering the draft of the letter of intent and the rest of the contracts, such as the purchase agreement, non-disclosure agreements, employment contracts, or even lease agreements.
- Due diligence: Before signing any binding contract, those who take part in the business transaction need to ensure they are about to enter into a profitable deal.
This requires a thorough inspection of the target company, which is called due diligence. This involves verifying the accuracy of the information the seller has provided.
When conducting due diligence, a lawyer and other M&A advisors will assess the company’s performance and identify any legal or financial liabilities that might affect the transaction. These findings will be used by the attorney to draft a purchase agreement that mitigates these risks.
- Regulatory compliance: Mergers and acquisitions are heavily regulated because they can create monopolies or be considered unfair practices in the competitive environment. For this reason, companies need to ensure they are under the antitrust regulatory approval. Also, ensure that the new entity is compliant with federal and state regulations.
What Do M&A Lawyers Do?
Although several professionals are involved in the M&A process, lawyers are responsible for guiding clients throughout the whole transaction. The list which follows describes some duties carried by an M&A law firm:
M&A Advisory Services
The attorney identifies the client’s business objectives and ensures all the actions are oriented in this direction. Also, the lawyer communicates the key considerations the client should keep in regard and solve any doubts concerning the M&A.
- Understand the standing of each party in the transaction
- Identify any red flags or issues that could affect the deal
- Prepare the client for the business acquisition and set expectations.
Transaction Structure and Mediation
The attorney will devise a strategy and set a completion timeline. Also, join and direct an advisory team that will help the buyer make an informed decision and address every legal aspect of the transaction.
Structure the deal and devise a strategy based on the client’s objectives, while considering the legal and tax implications.
- Build the M&A’s framework, timeline, and checklist of all the documents and activities that need to be addressed.
- Be a bridge of communication between the stakeholders and third parties.
- Gathering a team of attorneys and key agents, such as accountants, brokers, lenders, and other specialists will help the client make informed decisions.
- Protect the client’s information and sensitive data
- Manage conflicts of interest and ensure the integrity of the transaction
The attorney devises and implements the due diligence process to identify whether the merger or acquisition is a sound investment for the client. Through due diligence, the attorney gathers as much information as possible from the target company to spot any risks related to past law compliance, contracts, financial performance, and other aspects.
- Create an in-depth and tailored checklist with all the documents and operations to request and be presented by the seller in a data room, as well as a list of questions the seller will respond to.
- Check the accuracy of the information provided by the seller, including the financial performance of the company and the integrity of its assets.
- Revise legal documents, contracts, past litigation claims, outstanding debts, and other materials.
- Identify liabilities or areas of opportunity that impact the value of the company.
By conducting due diligence, the lawyer will determine whether the terms of the deal are fair for the client. The M&A attorney’s role is to achieve an ideal outcome for the client while ensuring the other party agrees with the terms of the transaction. A business negotiation can even take weeks, depending on the complexity of the deal and the position of the parties.
- Develop a negotiation strategy that is aligned with the client’s personal and business goals.
- Negotiate a purchase price, terms, or provisions in the client’s best interest.
- Provide tactics or strategies to the client
- Ensure a balanced risk allocation between the buyer and the seller
Drafting Of Contracts And Legal Documents
To have clear expectations of the M&A, and for both parties to be protected, the purchase or sale of a business needs to involve contracts that are created for that specific purpose. An M&A lawyer will draft and negotiate all the concerning legal documents, from the letter of intent to the purchase agreement. The following are some of the documents a lawyer will have to review or draft, which can vary according to the type of transaction.
a) Letter of Intent: The whole M&A process starts with this document. Although an LOI is not binding, the best practice is for an attorney to draft it, for it will be the backbone of the whole negotiation
b) Confidentiality Agreements: Also called Non-disclosure Agreements, they will play a significant role in the protection of IP or any sensitive information that will be shared across the transaction.
c) Due diligence checklist: Includes a list of the requested documents the buyer will provide and a questionnaire before the business acquisition.
d) Purchase Agreement: Based on the findings made in the due diligence process, the lawyer drafts a contract that defines the rights and responsibilities of the parties. The lawyer will ensure to add representations, warranties, and other provisions that focus on protecting the client’s interest.
e) Governance documents: Include contracts that dictate the relationship between the owners of a company, such as shareholder agreements, bylaws, articles of incorporation, and others.
d) Employment agreements: According to the needs of the parties, the lawyer has to arrange any existing contracts with the workforce of the company.
e) Post-closing documents: After the transaction has closed, the business may require certificates, releases, or other documents to finalize the deal.
A Day In The Life Of An M&A Attorney
A typical day for a Mergers and Acquisitions lawyer includes drafting documents and communicating with clients and colleagues.
The activities of M&A lawyers may vary, but generally, attorneys will:
- Design a strategy for the M&A
- Communicate with clients via phone or email to address the details of the transaction. Listen to their business objectives and communicate the risks involved.
- Contact other attorneys or specialists that will provide useful insights to make the transaction smoother.
- Do an extensive review of documents and contracts that are relevant to the deal.
- Draft purchase agreements and address legal issues
Required Skills For A Mergers And Acquisitions Lawyer
An M&A practitioner will need to have some of the following skills to manage successful transactions:
- Strategic thinking: Analyze the different alternatives and choose the best way to structure the deal for the client’s benefit.
- Negotiation: Being capable of using persuasion and mediation strategies to get the most favorable outcome to which all the parties agree.
- Communication: Having the ability to understand the needs of the client, and also inform the latter about what to expect from the transaction. Also, effectively communicating with the rest of the advisors to work toward a common objective.
- Drafting: Have great writing skills to write legal documents that will clearly define the terms of the deal
Other Key Agents In M&A Law
An M&A attorney may need the legal assistance of other lawyers, such as those involved in:
- Tax law: To help clients with tax compliance and advise them on the tax implications of the business transaction
- Finance law: Advise clients on securities laws and assist in the due diligence process. Assist clients with the use of loans and other financing methods.
- IP law: Protect the intellectual property of clients, including trademarks, patents, trade secrets, and copyrights.
- Antitrust law: Guiding how to avoid anticompetitive behavior and obtaining regulatory approval
- Property law: Address issues related to the ownership of real estate and guide clients in the land use regulations, including obtaining permits and variances.
When To Hire An M&A lawyer?
If you are involved in a merger or acquisition, the best practice is to hire a lawyer the earliest in the negotiation as possible. Prior to starting a formal deal, a lawyer will inform the client of the right steps to follow to ensure a smooth negotiation and proceed to write a letter of intent to the client´s best advantage.
A mergers and acquisitions law firm or attorney will assist the client throughout the transaction, and ensure any potential legal issue down the line is addressed.