What Are the Legal Steps in a Successful Merger or Acquisition?

What Are the Strategic Objectives of Mergers and Acquisitions?

Mergers and acquisitions (M&A) are pathways for companies to attain various objectives by coming together on roughly equal terms and amalgamating into one legal entity. The decision is usually mutual between the two parties, enabling them to enjoy more significant economies of scale while enhancing market competitiveness.

Nevada business lawyers add the following as other strategic objectives of M&A:

• Diversification: A merger and acquisition can enable companies to diversify their product or service lines to reduce dependency on a single market or industry.
• Market expansion: A merger can help companies enter new geographic markets or customer segments
• Talent acquisition: With an M&A, a company opens up opportunities for skilled personnel or specialized expertise to complement the existing capabilities of the acquiring company.
• Operational synergies: When companies merge resources, they can achieve cost savings, better performance, and enhanced efficiencies.

However, for an M&A to enjoy these benefits and operate at a greater efficiency, the acquisition process must be carefully executed. Nevada mergers and acquisitions attorneys provide an overview of the legal steps that lead to the success of an M&A.

Assessment and Preliminary Review

Before you can find a business to merge with or acquire your business, it is standard practice to commence the process through an Information Memorandum. This document is drawn up by the vendor and published to help gauge the market interest and ultimately sell the business or part of it for maximum value.

It contains enough information to help the buyer decide whether to pursue the acquisition. Work with skilled Nevada mergers and acquisitions lawyers to avoid mistakes, such as divulging confidential information. If the purchaser is interested in acquiring your company, they will draft a Non-Disclosure Agreement to secure your business’s confidentiality.

As a seller, a Non-Disclosure Agreement is particularly crucial as it protects your business’s secrets and valuable information. The confidentiality clauses are legally binding, and any party that violates them could face legal consequences.

Negotiation and Letter of Intent

The negotiation and letter of intent phase is crucial if there are multiple interested purchasers. A letter of intent is non-binding, written by the buy-side and common to all deals. It outlines what is being acquired, for how much, in what timeframe, by whom, and under what terms and conditions.

An LOI is the doorway to achieving more and demonstrating the buyer’s good faith. Take the time to evaluate the LOI to help you choose the most suitable buyer. If you don’t accept the terms, you can begin negotiations on the sticking points to arrive at the final version of the LOI. Skilled business attorneys in Nevada can guide you accordingly.

Due Diligence

Once you’re satisfied with the letter of intent and negotiations are in place, the next step is for the acquiring party to conduct due diligence on your business. This step is important because it enables the buyer to thoroughly examine your company to verify the information brought up during the preliminary transaction negotiations.

A typical due diligence process covers all aspects of your operations and will evaluate the following:

• Material contracts your company is party to
• Corporate records and related matters
• Real property owned by the business
• Employment contracts
• The business’ financing
• Licenses and consents your business is required to obtain
• Litigation and other disputes your business may be engaged in
• Intellectual property and assets the business owns

Merger and acquisitions attorneys in Nevada ass that these areas of due diligence often inform the types of due diligence the purchasing company shall undertake. Examples are legal due diligence, financial due diligence, commercial due diligence, human resource due diligence, operational due diligence, and tax-related due diligence.

Drafting the Negotiating Terms

Once satisfied with the due diligence phase, the buyer will negotiate and draft the terms of the transaction documents, with the main one being the sale and purchase agreement. It contains the terms of the contract and any adjustments required due to issues arising in the due diligence process.

The sale and purchase contract contains warranties and indemnities that give the buyer contractual protection. Drafting these agreements can be lengthy, so be keen to limit your exposure under the agreement. The buyer will also want to maximize protection from liability arising from errors or misgivings in the agreement.

Closing the Deal

The final stage involves negotiating the final price and agreeing on a strategy to determine the sale price and details of the warranties, indemnities, and any limitations that should be included in the purchase agreement. Common legal structures used in the M&As to maximize transaction success are:

• Stock purchase: The buyer can purchase your company’s stock, taking control of it without directly acquiring its assets.
• Asset purchase: The acquiring company buys specific assets, which can help them avoid certain liabilities, depending on the case specifics.
• Tender offers: The buyer can publicly offer to buy shares from your company’s shareholders, but this only applies to hostile takeovers.
• Joint ventures: You and the other company can agree to combine resources for a specific project of business activity while operating as separate entities

Consult experienced merger and acquisitions lawyers in Nevada to evaluate how each deal structure applies to your case and the most suitable.

A Skilled Business Attorney Guiding You Through the Legal Steps of Mergers and Acquisitions

Mergers and acquisitions are strategic tools for business growth and continuity, but they can be complex. Careful planning and proper execution are crucial for a successful outcome. Consider working with Nevada merger and acquisitions lawyers to avoid costly mistakes that could lead to legal disputes.

Saltzman Mugan Dushoff is a reputable business law firm with reputable lawyers who can offer guidance through the merger and acquisition process. Whether you’re considering buying or selling a business, we are here to protect your interests. Call us at 702-330-3441 for a consultation.