Mergers and acquisitions are vital strategies for businesses looking to consolidate their position in a market or entering a new one. These are critical transactions which involve a lot of complexities and therefore need to be handled carefully. Corporations depend upon legal professionals to negotiate such deals and close them successfully. They engage top mergers and acquisitions law firms to find suitable partners and navigate them through each stage of the process. It is essential that all corporate lawyers or individuals aspiring to become one know extensively about such deals. In this article, we are presenting a brief M&A guide for corporate legal advisers which will help them understand their roles in such transactions.
1. HelpThe Target Business Prepare For The Deal
One of the most important duties of a corporate lawyer is to prepare a target company for the deal. Professionals need to ensure that the best accounting practices have been followed by the organization while preparing and maintaining important financial statements. Acquirers depend on such documents to make sure that the company they are looking to obtain is financially sound. Moreover, attorneys also ensure that the target firm has proper documents which formalize its agreements with third-party entities like vendors and suppliers.
2. Advise On Structuring The Transaction
An M&A transaction can be structured in more than one way. Buyers can acquire the shares of the seller through a stock purchase agreement or take the asset purchase route and buy assets and liabilities of the target company. Both sides can also decide to combine their organizations into a single legal entity which will hold all the rights of its constituents. Corporate legal professionals must be able to advise their clients on the best route they need to take to close a transaction.
3. Conduct M&A Due Diligence
An integral and probably the most important part of mergers and acquisitions in India or any other economy is the due diligence. It is the procedure which helps a purchaser verify the selling entity’s claims about its condition. All information related to the legal, operational and financial aspects of the target company is scrutinized by the acquirer for this purpose. The legal team of the buying side makes sure that the value of the assets and liabilities are the same as quoted by the seller initially. Corporations depend on their attorneys to properly conduct M&A due diligence and identify any potential risks.
4. Create An Implementation Checklist
Mergers and acquisitions are complicated and time-consuming processes and it is essential that a stepwise plan is made to handle them. Business lawyers are required to create an implementation checklist which contains all the necessary actions that must be carried out for closing a deal. This register must also include the vital documents that must be provided by the other side. Attorneys must know about all the laws that can affect the transaction. This is essential for preparing a customized list for their client.
5. Negotiate The Terms Of Agreement
M&A law firms play a central role in negotiating the terms of an agreement on behalf of their clients. They are also responsible for documenting the pacts and ensuring that the language used for the purpose is unambiguous and ably protects their client’s interests. Stock or asset purchase agreements which formalize acquisitions must contain all the details of the transfer of the chosen instrument. They must also include representations and warranties from each side to the other for closing the deal. A merger agreement will include details related to the cancellation of the seller’s shares and the mode and amount of payment to be made to its shareholders. Lawyers need to be aware of all the important conditions that need to be inserted in an agreement to clearly define their client’s responsibilities and rights.
6. Advise Company Management On Their Duties
Attorneys are responsible for advising the key decision-makers of a company on their duties in such deals. They must point out any existing or potential conflicts of interests that can harm the negotiations and advise them on disclosing the information to relevant parties. Corporate lawyers must make sure that the senior executives have followed the best practices and the correct legal procedure while taking decisions. They must also check that the information provided for the decision-making processes was accurate. A business organization has a duty towards minority stockholders and must take into account views of those opposed to the transaction. Legal advisers have to ensure that all the shareholders’ and dissenters’ rights are protected during a deal.
7. Manage The Legal Team
As mentioned earlier, M&As are extremely complicated transactions with numerous processes. At any given time, numerous specialist attorneys hired by both parties are involved in a variety of work. They are asked by the organizations to prepare or scrutinize financial and legal documents which will be checked by the other side. For instance, intellectual property lawyers are hired to find whether the ownership papers of IP assets of the seller are in order or not. The in-house corporate lawyer or the senior counsel has to manage all such personnel and analyze their findings for framing the strategy. It is a vital task that M&A attorneys are required to carry out. The input provided by external professionals helps in negotiating with the other party and drafting important agreements.
Conclusion
Mergers and acquisitions allow corporations to extend their footprint in a market and secure a profitable revenue generation source. It is essential that businesses hire experienced local professionals with knowledge of laws in their jurisdiction to carry out the negotiations. For instance, startup lawyers in India can help large enterprises find ideal local smaller partners for acquisition. This will help a corporation enter the market on a sure footing.
