Mergers and acquisitions (M&A) are intricate business transactions involving two or more businesses consolidating. This can be done either by forming a new entity or by one company buying out another. These processes are integral strategies for companies looking to expand their business operations.
The M&A process can be quite challenging as it involves various operational, financial, and legal considerations. This is where M&A lawyers enter the fray.
This article delves into precisely what M&A is and the pivotal role of a mergers & acquisitions lawyer.
M&A law is a subset of corporate law about companies’ buying, merging, or partnering. It is a complex field that requires a profound understanding of legal issues that corporations may encounter during transactions.
It’s not just about buying companies; it also encompasses joint ventures, partnerships, and minority investments. Thus, M&A lawyers must be conversant with all these legal domains to successfully steer a transaction.
Additionally, M&A lawyers must be skilled communicators, effectively liaising with clients, other lawyers, and business executives to achieve the best results for their clients.
Here’s a closer look at what you can expect from M&A lawyers:
M&A lawyers play a crucial role in transactions. They provide expert guidance throughout the M&A process and assist with due diligence, negotiations, and contract drafting functions. As such, they must be involved from the outset of a deal to help execute it with proper documentation.
Moreover, mergers and acquisition lawyers often have a network of contacts in the business and specific industry community that can help identify potential acquisition targets. They also advise their clients on a deal’s tax implications and help plan the deal so that the client won’t have to part with much in taxes.
They also protect clients from risks because they can predict, spot, and mitigate risks for their clients, whether they are selling or buying. Some risks they keep an eye out for include:
- Diligence Risks: Making sure everything about the target company checks out is one of the primary roles of M&A lawyers. This process is intended to provide a legal perspective on the target company.
- Financial Risks: There are situations where a buyer might need a loan to finance an acquisition, but the bank needs to assess the selling company before signing off on the loan. M&A lawyers put structures in place to ensure the selling company cooperates with the deal’s financing.
- Deal Jump Risk: A deal jump risk is typical if the seller is a public company. Board members have a fiduciary responsibility to get the best value for their stakeholders. This often leads to deal jumping. A mergers & acquisitions lawyer can place termination fees on the contract to mitigate this risk.
Mergers and acquisitions can be complex transactions with many legal considerations that significantly affect businesses. Risks exist at every juncture, so sellers and buyers must work with a mergers & acquisitions lawyer.
From due diligence to post-closing integration, these legal experts play a vital role in M&A by providing legal guidance and counsel throughout the processes.