Merging with, acquiring, or even being acquired by another company can provide many business and competitive advantages. Joining forces often allows companies to take advantage of new economies of scale, to pool resources, or obtain technologies and a system that would otherwise have required licensing or fresh invention and the of infuse cash into valuable operations that may be temporarily foundering.
However, mergers and acquisitions are also among the most complex matters most businesses will ever undertake, and knowledgeable guidance is required not only to protect both parties, but to ensure compliance with a myriad of governmental regulations. Working with attorneys experienced in the mergers and acquisitions process can protect you from costly mistakes that could even derail the process completely.
Premerger Notification and Review
Not every merger or acquisition requires advance notification. The thresholds determining whether or not this step is required are updated annually. Our attorneys can advise you as to whether or not premerger notification is required in your circumstances.
Where premerger notification is required, both the buyer and seller are generally required to file forms and provide information about the industry in which they operate and about their individual businesses. A review is then undertaken by either the Federal Trade Commission (FTC) or the Department of Justice (DOJ).
A waiting period is then imposed, which varies depending upon the circumstances, and may be either 15 or 30 days. The parties may not move forward until the waiting period expires or is terminated by the reviewing agency. In some circumstances, the agency will request additional information, which will extend the waiting period. If the final waiting period expires without challenge, the parties may move forward.
The agency may challenge the merger or acquisition, which may proceed in one of two ways:
- Negotiation of a consent agreement adding provisions that will eliminate the anti-competition concerns
- Filing of a preliminary injunction in federal court to stop the transaction pending an administrative trial
Working with experienced mergers and acquisitions attorneys will help ensure that proper procedures are followed from the beginning, and that submissions are timely and compliant. If a consent agreement is required, the attorneys in our firm have the knowledge and experience necessary to represent your interests through that process.
Due Diligence in the Mergers and Acquisitions Process
Governmental agencies are not the only ones who will be conducting a thorough review before the merger or acquisition moves forward. You should be prepared to conduct your own due diligence and expect that your prospective buyer or seller will be doing the same with regard to your business.
Some of the core areas for inspection include:
- Corporate documents, including formation documents, shareholder agreements, bylaws, minute books and repurchase commitments
- Intellectual property holdings, including technology, trademarks and service marks, patents, copyrights and licenses
- Contractual commitments, ranging from licensing and escrow agreements to employment, noncompetition and nondisclosure agreements, leases and indemnification agreements
- Employee, employee benefits and compliance information relating to human resources
- Pending or potential litigation or other disputes
- Financial holdings and obligations
Of course, this is just a top-level list with selected examples in each category. A detailed list of items for inspection, or which you will likely be expected to provide to your prospective purchaser or partner, would be several pages long. Our attorneys are prepared to assist with this process and ensure a thorough investigation.
Negotiating and Drafting Mergers and Acquisitions Agreements
The groundwork described above is extensive, but is only a foundation. Once due diligence is completed and the premerger review is completed (if required), the parties must negotiate a detailed agreement that will include:
- The form of the resulting company
- Executive roles after the merger or acquisition
- Buyouts or other compensation for downsized employees
- Responsibility or indemnification for existing or potential liabilities
- Treatment of shareholders of the original companies
Depending on the nature of the business, the assets and liabilities involved, the disposition of human resources, the impact on stakeholders and a variety of other factors, these negotiations can be extremely complex and detailed. Then, when the parties have agreed on all of the terms and are confident that the planned event is legally compliant, an agreement must be drafted that clearly and thoroughly addresses each of the many issues raised by the merger or acquisition.
Work with an Experienced Mergers and Acquisitions Attorney
A merger or acquisition can have a significant impact on many aspects of your business, from corporate structure and cash flow to day-to-day operations. Be sure that you’ve created a clear, strong foundation for the entity that will be moving forward by working with an experienced attorney. Contact KPPB LAW today.