Acquiring a business is an exciting endeavor. Acquisitions and mergers are a great way to expand your growing business. However, new opportunities always bring new challenges.
Legal considerations are one of the ways that Mergers and Acquisitions (M&As) can present challenges to a business. These are a few of the potential issues that you as a business leader will have to contend with during an M&A.
One of the first things that you must consider before conducting an M&A is the presence of any regulatory issues. When it comes to M&As, anti-trust concerns are a common issue.
Anti-trust laws prevent one company from forming a monopoly in a specific market. When you merge with or acquire a competitor, you will have to be careful that you do not upset any regulations by doing so.
Due diligence refers to the process of vetting the target company. This usually involves a long process of reviewing a company’s financial documents, contracts, etc.
While due diligence can involve non-legal issues such as a business’s valuation or the strategic fit of the two companies, there are several legal issues that you must review during the process. These can include:
- Assumed liability: Whenever you acquire a company, you not only acquire their assets, but you also take on their liability. This means that you may be exposing your business to any litigation that the target company currently faces or will face in the future. You may also be liable for any non-compliance issues the target company faces with the government or other regulatory agencies.
- Intellectual property: A big part of a company’s value will often lie in their intellectual property (IP). However, not all companies protect their IP equally. You will want to know what IP you will gain the rights to, and how well protected it is.
- Material contracts: Contracts are one part of a business that is often overlooked in the due diligence process. A lot of the value of a company may live in the contracts they hold with their employees and vendors. Reviewing these contracts is an important part of assessing what human resources you can count on after the M&A.
Another legal issue that is important to deal with during the process is the structure of the deal. Coming up with a deal will require negotiation and contract drafting. This is an important step of the process to make sure that both sides are protected during the deal and receive the assets they are owed.
How a lawyer can help
An experienced business attorney can help identify and mitigate these legal concerns. Utilizing an attorney can help you get the information and advice you need while allowing you to focus on other aspects of the M&A.