moazahmedM&A are deals which encompass the combination of two or more companies or assets through different approaches to financing.
In this process, lawyers are of utmost importance, to make sure that every legal issue is taken into consideration for the benefit of the parties involved.
They are involved right from the beginning of the negotiation process of a deal and right up to the sealing of the deal.
1. Due Diligence
This is because one of the many tasks that lawyers have in M&A is to conduct due diligence.
This entails an assessment of the legal, financial and operational health of the target company.
Some of the documents that lawyers review are contracts, financial statements, employment agreements, patents or copyrights and any issues that could give rise to a legal suit.
This makes it easier to determine any risks or liabilities that could be a concern when it comes to the transaction and therefore, the acquiring company will be well informed on what it is buying into.
2. Structuring the Deal
It is the lawyers that recommend the best way to structure the deal; whether it is in the form of a merger, an asset purchase, or a stock purchase. T
he structure of the firm has a direct impact on taxation, legal issues, and the issues of compliance with the regulations.
For instance, a stock purchase may be suitable to acquire the target company’s licenses and permits, whereas an asset purchase may be more suitable to keep away from some liabilities.
On such issues, the lawyers advise the clients on how best to structure the transaction so as to suit the clients’ strategic objectives.
3. Negotiation of Terms
Another important task that the lawyers perform in the course of M&A is the negotiation of the deal terms.
These include the acquisition cost, mode of payment, undertakings and warranties, undertakings and indemnities.
This is because Lawyers are professional and their primary role is to ensure that they get the best for their clients in issues of such conditions and where possible minimize on the potential risks.
It also prepares and reviews legal documents which include the letter of intent, confidentiality agreements, and the final purchase agreement to make sure that they are clear and legally binding.
4. Regulatory Compliance
Requisites of the law are considered to be a crucial factor of M&A transactions, as the following discussion will reveal.
Mergers and acquisition are legal processes which are controlled by several laws and regulations such as antitrust laws, securities laws and other industry laws.
They assist in the process of securing permissions from regulatory authorities for instance the Federal Trade Commission (FTC) or Securities and Exchange Commission (SEC) and ensure that the deal complies with set laws in order to prevent the firm from being penalized.
5. Financing the Transaction
Lawyers are also involved in the process of sourcing for funds for the transaction.
They may help to negotiate the terms of the lending instruments, which include loans, bonds and any other form of credit.
Lawyers make sure that the conditions that come with the financing are
favorable and that all legal procedures are well followed.
They liaise with financial advisors as well as investment banks to ensure that the financial structures put in place are legal.
6. Closing the Deal
The process of wind up of M&A transaction includes preparing and signing of all the necessary documents, transferring of title and making sure that all the stipulated conditions have been met.
Lawyers oversee this process with other intermediary members including accountants and financial consultants to achieve the best results.
They are responsible for overseeing the drafting of closing documents and for handling any final problems that may occur and which could cause problems or hold ups.
7. Post-Merger Integration and Dispute Resolution
After the deal is done, lawyers are still involved in the processes of post-acquisition integration and in case of any future conflict.
They help in the harmonisation of the human resource policies of the acquired company in relation to employment laws, intellectual property and contracts.
Should there be conflicts in the course of the integration or even after it, attorneys act for the clients in talks, mediations or even court proceedings to work towards the solution of such conflicts.
Conclusion
The position of lawyers in mergers and acquisitions is complex and considerable for the accomplishment of the deal.
They give professional advice on aspects such as due diligence, deal making, negotiation, legal issues, funding and integration of the merged companies.
Through such legal issues, lawyers assist organizations to deal with the challenging M&A environment thus guaranteeing that the deal is in harmony with the strategic objectives of the organizations and has least possible risks.
