Your Deal Team
For both buyers and sellers, you need the right team to get the deal done right:
M&A Advisor
A business broker, investment banker, or other M&A advisor can advise on many aspects of the transaction. They can also help you market your business to potential purchasers and help you identify potential acquisition targets. They can also assist with valuations, diligence, and other aspects of the transaction.
M&A Legal Counsel
An experienced deal attorney can assist with many parts of the transaction as discussed in more detail below.
Tax Advisor
A tax advisor is an integral part of the process, advising on deal structuring and other tax issues. This can be your regular CPA for smaller transactions or an M&A-specific tax advisor for larger transactions with more complex features like equity rollovers and F-reorgs.
Other Professionals
Depending on the size of the transaction, it also makes sense in many situations to involve industry consultants, diligence professionals, and HR experts.
For buyers, a good deal team can help you get the deal done in a way that works for you OR avoid a bad deal that’s unsalvageable. Sure, experienced advisors are expensive, but nowhere near as expensive as closing on a deal you shouldn’t have. For sellers, expert advisors can help you put your best foot forward and get the deal closed in a way that protects your interest.
M&A Advisors
Usually, one of the first steps for a seller considering selling its business is to retain a business broker or other M&A advisor. If the seller has already retained legal counsel, counsel often helps with retaining an M&A advisor, including with respect to the details of when fees are owned. Business brokers and other M&A professionals bring tremendous value to transactions. Business brokers help the seller prepare the business for a sale, market the business, attract potential buyers, and help with deal terms. On the buy-side, they help identify attractive acquisition candidates and advise on the merits of individual businesses, including the purchase price.
M&A Legal Counsel – Do I Really Need a Lawyer?
In most situations, the seller is represented by a business broker or other M&A professional, and, in some cases, the buyer may be, too. Since a business sales professional is already involved, some purchasers and sellers wonder if using a lawyer is really necessary? The short answer is yes. Attorneys play a different but complimentary role in transactions. For that reason, professional dealmakers like private equity firms use attorneys in every transaction. If they make deals for a living and recognize the value of an experienced M&A attorney, doesn’t the same reasoning apply even stronger for the first time buyer or seller? Here are some of the reasons why PE firms use attorneys from the NDA and LOI through closing:
Your Interests
The seller’s business broker works for the seller and has an interest in getting the deal done on terms that make the seller happy. If you’re a buyer, you need someone in your corner that represents you and your interests. And if you’re a seller, you need someone to advise you on legal issues. Your attorney should represent your interests while being solution-minded and working to get the closed on terms that work for you.
Deal Structure
Along with your tax adviser, your attorney can advise you on deal structure. There’s no reason to blindly accept an asset or stock deal if other options make more sense. Also, things you may not be aware of: For example, if you need to do a stock deal to transfer a key contract or license, you can still get asset deal tax treatment through a Section 338(h)(10) election if both parties agree.
NDAs
Many form NDAs are not up to standard and protect the M&A advisor’s proprietary deal flow more than your confidential information. Many also don’t protect your customers, suppliers, and employees from being poached. That’s especially true where the other party is a competitor, which happens often, as competitors are often the most logical deal partners.
Letters of Intent
Your attorney will help ensure that all the important terms, including those that are key to you, are covered in the letter of intent (LOI). There’s no reason to spend additional time, money, and energy on a deal if you can’t reach agreement on basic issues. Not having an attorney assistance with an LOI can be a major mistake, as unrepresented parties often agree to legal terms they do not understand and that are not market standard with respect to things like reps and warranties and indemnification, among others.
Legal Diligence
Your attorney will assist with legal due diligence, including reviewing corporate documents, contracts for termination rights and change-of-control provisions, and assessing regulatory and other risks. Legal due diligence can be tremendously important, including for deal structure. If the seller wants to do a stock deal because of change-of-control provisions in key contracts but those contracts have short termination for convenience provisions, an asset deal could be more appropriate.
Acquisition Agreement
Many agreements are done on business broker or other standard forms. Your attorney can help you determine if that’s appropriate for your transaction and, if so, will advise on specific changes or addendums to the form agreement. At Weavil Law, we believe in keeping things as simple as possible and not overcomplicating matters. If a standard form is appropriate, there is no reason not to use it.
Larger and more complex transactions, though, typically involve agreements custom-tailored to the particular transaction. If that’s the case for your deal, your attorney will help prepare and negotiate the acquisition agreement, as well as ancillary agreements like lease assignments, employment agreements, and others. An experienced M&A attorney will use the acquisition agreement and other agreements not only to implement the key deal terms from the LOI on a more granular level, but also to protect you from and mitigate risks (including those identified in diligence, if you’re the buyer).
Here to Help
If you’re considering an M&A transaction, Weavil Law is here to help. Don’t hesitate to reach out to Weavil Law by calling 650.308.8187 or by email to contact@weavillaw.com
Weavil Law
