Mergers and acquisitions (M&A) are the consolidation of two companies. A merger refers to two companies coming together to become one, whilst an acquisition is one company taking over another.
M&A is a complex area with many considerations. 5 key points you should keep in mind are:
1. M&A deals take a long time
From market, to negotiation, to close, M&A deals take a very long time and you need to be sure of your choice and in it for the long haul. A deal taking 4-6 months is not uncommon, it depends on the urgency of the company doing their due diligence. To try and speed up the process make sure you start your preparations early. The CEO and CFO should be prepared to answer questions early on, and all presentations and materials should be organised early in the process.
2. Understand the due diligence process
Its important for buyers not to underestimate the due diligence process. This is the most time-consuming part of the M&A process. It is also a significant obligation. The buyer needs to understand the nature and extent of selling companies contingent liabilities, problematic contracts, litigations issues and risks, and many more.
This takes a substantial amount of time and very thorough due diligence to avoid any liability being incurred by the buyer. To make the process a little easier, it might be sensible to set up and online data room. This is an electronic store of all the company’s key documents and allows information to be shared in a controlled and confidential manner.
3. You need a skilled M&A lawyer to help
These transactions are incredible complex and it is easy for some issues to fall through the cracks. An experienced lawyer will know what to look out for. The M&A lawyer will be skilled in business as well as the law and will be able to spot the pitfalls in the deal.
4. Acquisition agreement is important
You will need a strong and definitive acquisition agreement for the deal to be successful. The seller needs to be able to protect their interest and should therefore have their own lawyers create the first draft of the agreement.
5. Handle employee and benefits issues with sensitivity
For the seller, the M&A process can bring a lot of uncertainty for employees. It’s important to manage the expectations of employees and handle any changes or redundancies with the appropriate care and sensitivity.