A merger combines two separate companies to create a consolidated entity, resulting in a new organization. On the other hand, an acquisition entails taking over another entity, with the target ceasing to exist and becoming part of the acquiring company.
The rationale behind most merger and acquisition (M&A) transactions is to gain strategic business advantages like achieving operational synergies, enhancing revenue, gaining tax benefits, and creating shareholder value.
Completing an M&A deal, however, requires sorting many legal matters. This is why all parties involved — whether it’s the target, acquirer, seller, or shareholder groups — must be guided by M&A experts who can perform all the necessary tasks and provide excellent advice.
Why obtaining legal counsel is essential in an M&A deal
M&A attorneys advise clients in a variety of deals, including mergers, acquisitions, stake purchases, divestitures, joint ventures, and other M&A transactions. They are experts in the areas of structuring, due diligence, negotiation, and closing. They also help clients identify potential risks and deal loopholes throughout the entire process.
Moreover, M&A attorneys help draft legal documents such as a letter of intent (LoI) and a definitive acquisition agreement. In most cases, they may also help draft employment agreements post-merger.
But a truly dependable M&A team gives value by understanding the client’s business and uses this knowledge to solve complex transactions and provide customized advice. Entities entering an M&A transaction would greatly benefit from obtaining the counsel of M&A attorneys, whether they’re on the buy-side (acquirer) or sell-side (target) of a transaction.
Counsel to buyer
M&A attorneys acting as counsel to buyer may draft documents detailing deal terms, such as the price, type of consideration to be paid (cash, stocks, a combination of cash and stock, etc.), adjustments to the price, exclusivity periods, matters pertaining to insurance against damages resulting from breaches of the seller’s representations, and more.
As an M&A deal enters a definitive stage, the assistance of an M&A attorney remains critical. That’s because a definitive merger agreement will contain crucial details like the structure of the transaction (merger, stake purchase, etc.), purchase price and other relevant financial terms, conditions to closing the transaction, and provisions for termination of the M&A agreement, among others.
Regardless of the transaction size, M&A attorneys will ensure that the details in the agreement are all accurate and all the client’s questions are answered.
Counsel to seller
The selling party or target usually needs to deal with an assortment of legal, business, financial, human resources, and other issues in an M&A deal. They’ll require expert counsel who can help curb delays that may be caused by regulatory requirements and contractual approvals.
More importantly, sellers have to deal with matters concerning the company’s valuation, which entails determining whether the price offered by the buyer is fair, i.e., the price is equal to or exceeds the business’s current value.
Sellers can leverage their M&A legal counsel in structuring the deal to their advantage, particularly to ensure minimum liability and maximum tax benefit. Selling companies may also want to ensure that issues, such as those concerning existing employees, are covered.
In any M&A transaction, some scenarios require the expertise not just of financial experts but of a highly skilled M&A legal team. KMH&L Attorneys have provided expert counsel to corporations, limited liability companies, and business partnerships. The M&A attorneys in our New Jersey offices ensure clients meet their strategic objectives. Tell us about your case and our M&A experts will call you back.