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What are mergers and acquisitions?
Mergers and acquisitions (M&A) deal with the merging of two companies, which consequently form a new legal entity under a new business name. An acquisition involves the purchase of another company/companies. Within M&A there are different types of transactions including consolidations, tender offers, acquisition of assets, and management acquisitions, as well as different ways of merging or combining companies into a new entity like horizontal mergers, vertical mergers, congeneric mergers, market-extension mergers, product-extension mergers, conglomerations, purchase mergers, consolidation mergers, and reverse mergers. Each type of M&A has legal ramifications that require a business law attorney who can draft, negotiate and execute contractual agreements for all parties involved.
Why do I need legal guidance on mergers and acquisitions?
Mergers and acquisitions occur in business quite frequently for a number of reasons like increasing value, diversifying business operations and offerings, acquisition of assets, a lack in financial capacity, tax purposes, and even personal interests. No matter the reason for M&A, it’s important to have a legal team in place to assist with the transaction.
Experienced M&A lawyers will work directly with clients to put in place the appropriate financing (including cash and/or stocks) for mergers and acquisitions, and advise on drafting, negotiating and executing contracts for the sale of the business or a portion of the business. When an M&A lawyer or team of lawyers work with a business in the M&A process, they will generally:
- Identify the client’s business objectives
- Flag legal issues
- Create a legal strategy for the client
- Advise on deal negotiations
- Consider tax implications
- Assess regulatory risk
- Work with local counsel (if cross-border)
- Obtain all necessary documents (e.g., consent from third-party lenders, contracts, etc.)
- Negotiate for an agreement to close the deal or refuse a buyer’s deal if terms are not met
- Create strategies for post-closing agreements and support implementation of those strategies
At Blake Harris Law, we specialize in M&A by working directly with buyers and sellers, as well as in-house legal counsel, executive teams, founders, senior management, and many more stakeholders. By assessing the financial, operational, and legal factors and ramifications of a merger or acquisition, we create strategic solutions to support our clients achieving their business objectives.
What are the risks associated with mergers and acquisitions?
Without careful research, recordkeeping, analysis, and due diligence, a M&A deal can go wrong and cause financial, operational, and cultural risk. Below are examples of risks associated with M&A deals before and after the transaction is complete.
- Miscalculation of valuations
- Overpayment of the target company
- Possible litigation
- Unexpected costs
- Unknown liabilities (e.g., representations and warranties insurance (RWI))
- Employee distrust
- Lack of communication causing decreased employee morale, trust, and productivity
- Lack of employee engagement
- Nonexistent corporate cultural assimilation
- Shortage of synergies
- Discrepancies in interpretation of the contractual agreements
- Insufficient integration of sales, management, etc.
- Insufficient technology stack
- Intellectual property
- Lack of strategy moving forward
- Not conducting a comprehensive due diligence
- Unclear or loss of strategy and execution
- Underestimation of work
Mergers and Acquisitions FAQ’s
Glossary of Important Terms
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