Some of the world's largest companies were born out of mergers or acquisitions, such as AT&T Inc. (T - Get Report) and Time Warner, Inc. in 2016 to Anheuser-Busch InBev (BUD) and SABMiller in 2015. Getting to real basics, M&A is employed when two businesses seek to combine into one, or when a more prominent company wants to control a smaller one.
Mergers and acquisitions among private companies entail to several issues in several corporate fields such as legal, HR, strategic, intellectual property, and financial, to mention a few. To successfully sell your company is important to understand the operational issues that frequently arise.
In this guide, we go through 3 key points to consider in mergers and acquisitions, from the viewpoint of the seller.
1. Mergers and acquisitions transaction can take a long time
According to Mr. Saliba, Managing Partner at NMS Consulting, "Sellers should be aware that mergers and acquisitions transactions can take a long period of time; 4 to 6 months is very common. The time frame is strongly influenced by the urgency of the buyer to perform and his/her due diligence about the company to buy". To shorten this time frame, itis often recommended for sellers to prepare and organize a complete due diligence file on its business and to run a competitive process to sell the company, generating interest from multiple bidders.
Also, it is recommendable during this process to hire an experianced advisor to coordinate with the company’s legal advisor and perhaps its investment bank and to run a controlled auction sale process. A controlled auction sale process creates a competitive environment, forcing potential buyers to make decisions quicker.
2. Sellers should help the due diligence investigation the buyer will take???
Mergers and acquisitions typically involve a large amount of due diligence by the buyers. It is very common that buyers will want to ensure what obligations they are assuming in making the acquisition, as well as knowing all the selling company's liabilities, litigation risk, intellectual property matters, and so on. This investigation is particularly true for private company acquisitions rather than public ones since private selling is not subject to the examination of the public markets. During private companies sellings, the buyer usually has little or no access at all in obtaining information from public sources.
Private buyers usually follow strict due diligence parameters and guidelines that involve intensive investigations about the company and its management team to buy performed by multiple acquisition consultants and advisory teams.
The seller can facilitate this long and complicated process by giving to potential buyers access to the data they need for their investigations, reducing a substantial amount of time the buyer would have invested in finding this information.
3. You Need a Great M&A Lawyer
An M&A transaction to succeed needs seasoned M&A attorneys and experts in appropriate specialty areas (such as tax, payrolls, worker matters, real estate, intellectual property, cybersecurity, data privacy, antitrust, and international trade).
M&A transactions involve complicated agreements and contentious legal issues. To be efficient, an M&A lawyer has to be well aware of the business aspects of the M&A deal, as well as the overall inner structure of the purchase agreement. An M&A transaction demands an experienced lawyer who has closed many M&A acquisition in the same field before.
"You shouldn’t have a general practitioner or general corporate lawyer guide the seller through the M&A process or negotiate and draft the acquisition documents. You must have a lawyer who primarily or exclusively handles mergers and acquisitions. There are many difficult and complicated issues in structuring M&A deals, putting together acquisition agreements, and executing the transaction" (source).
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