When two business entities combine, a merger and acquisition attorney like Montague Law ensures a smoother process. They offer legal support and a practiced hand, ensuring that both parties adhere to stipulations within the law. Employing a business lawyer like ours also ensures that the merger or acquisition circumvents any legal and financial pitfalls while it is finding its footing in the niche market.
What does a merger and acquisitions lawyer bring to the table? In this article, we will examine this fascinating area of law in more detail, specifically looking at the role of the merger and acquisition attorney (M&A attorney) in streamlining the process.
Essential Things to Know About Mergers and Acquisitions
Mergers and acquisitions (M&A) happen all the time in Florida and nationwide. Businesses grow and adapt, and this development sometimes leads to collaborations in the hope of boosting profits or expanding goods and services.
Mergers and acquisitions attorneys, such as John Montague’s team, handle a branch of business law that oversees the legal aspects of one entity joining another. Their tasks cover areas such as the purchase transaction, the creation of the new business identity, and the integration of employees. They also advise on the new business’s operational practices in terms of Florida’s legal framework.
Before we go into more detail about the role of a mergers and acquisitions lawyer, we need to understand the key features of this business strategy. Here are five considerations:
1. Mergers and Acquisitions Take Time
Mergers and acquisitions take a long time to come to fruition. In Florida, it may take four to six months on average for these transactions to finalize, and that is only the initial handover. The timeframe also depends on the urgency of the buyer and seller and the effectiveness of both parties performing due diligence.
Another complication might be the seller’s ability to generate interest from multiple bidders. In this case, the assistance of a reputable merger and acquisitions attorney is invaluable. The parties might also find it useful to use a legal representative who can connect them with other professionals, such as investment bankers and financial advisors.
A merger and acquisitions lawyer advises buyers or sellers on how to solve potential delays in the process, including:
- Regulatory requirements, like the Hart-Scott-Rodino Antitrust Improvement Act
- CFIUS (Committee on Foreign Investment in the United States)
- Third-party rights
- Contractual approval
2. Merger and Acquisition Valuations Are Always Negotiable
A primary advantage to employing the services of firms like Montague Law is the confidence it offers to the buyer or seller. For example, the offer price and valuation amount of a business are always negotiable, and fair prices need to look at factors such as:
- The business’s valuation at the last round of financing
- The prices that early-stage investors and employees paid in recent share sales
- The latest 409A valuation for the business from independent appraisers
- Past financial performance
- Projected growth
- The management team’s experience
Even if a proposal feels right, it is standard practice to present a counteroffer that’s more in line with what you envision for the merger or acquisition. Buyers rarely offer consummate prices at the initial stages of the negotiation; they expect a reasonable counteroffer.
3. Buyers Will Undertake Due Diligence and Sellers Should Anticipate It
A buyer must undertake due diligence during a merger and acquisition. They should want to know what they are buying, the obligations they will be assuming when they buy the business, any contingent liabilities. They should also find out about litigation risks and intellectual property issues.
This due diligence is particularly important in private company acquisitions that do not have the same level of scrutiny as public markets. There may not be pertinent information about the company from public sources, so research is crucial.
A private company looking to sell should ensure that its books, contracts, and records can stand up to copious scrutiny from any potential buyer; details matter. Items such as signed Board of Director and Stockholder minutes or resolutions, signed employee-related documents, and audited financial statements must be readily available.
4. Intellectual Property Details Are Important
An important step that every selling company should anticipate involves preparing a review of the business’s intellectual property and documentation for the buyer. The buyer can then confirm that the agreed value is accurate. It also confirms that the seller has the right to the current and future intellectual property in a legal sense.
- The buyer will review the broad licenses and control provisions, revealing certain risks that the buyer may face as the new owner.
- The seller’s intellectual property status may also affect the price the buyer will pay for the acquisition. For instance, if a license terminates upon a control change, the buyer may seek a price reduction. If the seller does not accept this, they might walk away from the deal.
5. Employee and Benefits Issues Are Sensitive
Employee and benefits issues are challenging issues to navigate during a merger and acquisition. Emotions can blur the lines, but objective legal advice from representatives like Montague Law can ease the decision-making process. Related issues sometimes cover:
- The acceleration of payouts to management and key employees
- Restricted seller-issued equity
- The handling and payment of outstanding employee stock options
- Retention agreements
- Terms of employment for any new hires
- Termination of existing employees after the closing
- Termination costs and responsibilities
- Non-disclosure agreements (NDAs)
- Problematic employment agreements for the buyer to handle
Solutions are not straightforward, and the counsel of a merger and acquisition attorney can ensure a smoother transition.
How Do Mergers and Acquisitions Lawyers Help the Process?
Why hire legal firms like Montague Law for Florida mergers and acquisitions? External counsel is crucial for navigating appropriate areas of law, including:
- Data privacy
- Antitrust laws
- Compensation and benefits laws
- Real estate law, and
- Employee matters.
Mergers and acquisitions are complex, fast-moving, and typically contentious. An attorney like ours knows how to oversee the process and guide parties through the realities of merger deals. They also advise on strategies that will make the overall structure of the acquisition agreement more plausible.
A merger and acquisition attorney that has worked on prior deals will likely be more efficient. Substantive knowledge of the law means that the lawyer can also act as a skilled negotiator, advisor, and draftsperson. They will act as a point of contact, and:
- Anticipate pitfalls
- Communicate with relevant parties
- Gather information and documentation in a timely fashion
Relying on the expertise of mergers and acquisitions lawyers like ours also leaves the business free to handle operations and forget about the lengthy negotiations. The attorney will also:
- Research the other business entity
- Oversee discussions on price and terms,
- Draft Memorandum of Understanding documentation and letters of intent, and
- Review all contracts and purchase agreements.
A business buyer or seller needs to ensure that they adhere to state, federal, and securities laws, and firms like Montague Law make that far simpler. Some deals require unique documents, such as memorandums of due diligence, non-compete agreements, and confidentiality agreements, which a merger and acquisition attorney will prepare. They also prepare the company for the transition, including advice about shareholder rights and fiduciary duties under the new arrangement.
Key duties of a merger and acquisition attorney will also include efforts to:
- Identify business objectives
- Conduct due diligence and investigations on the other party
- Map the process, including a realistic timeframe
- Advise buyers and sellers on fiduciary duties and shareholder rights
- Identify legal issues for friendly mergers and hostile takeovers
- Determine the tax and other financial implications or restructuring
- Explain the risks and how to avoid them
- Guide negotiation tactics
- Consult antitrust attorneys to assess regulatory obstacles and approvals
- Seek third-party consent from lenders or other stakeholders
- Advise whether to negotiate further or pursue another deal
- Draft and review the agreement
The mergers and acquisitions lawyer can also help you sign an agreement, publicly announce the deal, and close the proceedings.
When Should You Hire a Merger and Acquisition Lawyer?
It would be a mistake to wait to hire a merger and acquisition lawyer when it is time to close the deal. The process is far simpler using these services from the early stages. Business lawyers help sellers and buyers with every aspect of the complex legal landscape of a merger or acquisition, ensuring complete focus on a successful closing.
It is wise to counteract risk by setting up a potentially profitable business deal the right way. Without our attorney to guide the process, minor errors or even negligence can taint these efforts or derail the transaction entirely. Rather let a firm like Montague Law assist the parties involved in the merger and acquisitions process and avoid the pitfalls of Florida’s regulatory landscape.
Schedule a Consultation with Montague Law Today
Are you a small-to-medium enterprise interested in merging with or acquiring another business in Florida? Proper legal counsel from a merger and acquisition lawyer provides an opportunity for you to negotiate a great deal and reduce potential risks.
Contact the Law Offices of John Montague at 904-234-5653 today for a competent business attorney in Fernandina Beach, Amelia Island, and Jacksonville, Florida.