Selling or merging a business can feel like an overwhelming process, with many legal points to be considered.
If you are a seller in a merger and acquisition transaction, you should avoid the most common five mistakes others have made to ensure a successful transaction.
Having a lack of information about the current condition of the industry
To ensure success, having a good level of understanding regarding the industry and market competitors is a must. Many agreements do not succeed due to a lack of understanding and information regarding the changes in the industry and economy – these changes can have a huge effect on the sale price of the company.
In every industry, advancements and developments are made on a continuous basis which can have a significant impact on the sale of your company. Due to this, you should work with specialists who can provide useful insight, including your solicitors who will likely have an on-going and updated grasp on current trading conditions and the M&A market.
It is important to remain realistic about the value of your company and working alongside industry specialists can help you to understand why your company is valued at the price it is.
Having incomplete or onerous contracts
In order to successfully complete a merger or acquisition, due diligence must be completed. This process is highly important in any transaction, and the transaction will more than likely come to a halt if you fail to provide all the necessary requested information.
Due diligence is an audit of a potential investment completed by a potential buyer. Their aim is to verify the accuracy of the seller’s information and assess its value, thus it is a highly important part of the process.
Part of this process will typically involve a review of a company’s existing contracts and agreements, as well as its general terms and conditions. Any contracts that create challenging legal obligations could possibly impact the attractiveness of the deal.
Issues with due diligence can lead to dissatisfaction from the buyer, possibly leading to an unsuccessful transaction. Having this information ready will ensure you are prepared for potential buyers. It is best to organise this in advance before completing due diligence.
Not having a clear post-merger plan
Often, you may be so focused on the process of the merger or acquisition that you lose sight of the long-term plan for the company.
It is of crucial importance to maintain a vision for the company long-term in order to ensure future success, while this may appear to be an obvious consideration, it is unfortunately where many companies fail.
This is perhaps one of the common mistakes often made and in this case, speaking with a solicitor could help you put necessary contractual agreements in place and consider future legal requirements of the business.
Failing to communicate the vision and strategic fit
It is important to consider whether your company is compatible with the firm you plan to merge with.
This should be considered before and during the process, ensuring open discourse between parties regarding the future of the business. Regular and clear communication between buyer and seller is absolutely vital in the merging of the companies and should be prioritised throughout the process and beyond completion into the newly formed company.
Not hiring an experienced, specialist corporate solicitor
Working with a specialist holds many benefits. We can help with a range of challenges, including complex legal situations and purchase agreements.
A merger and acquisitions specialist, with years of experience, can recognise the legal complications which can arise and as a result of a sale and can provide advice on how to best handle these issues.
Specialists understand the various challenges that business face and can handle negotiations of an NDA, the conducting of legal due diligence, and reviewing documents that may create unattractive obligations for a seller.
For more help or advice on related matters, please get in touch with one of our Corporate Partners, Maung Aye, on +44 (0) 20 7240 0521 or at maung.aye@mackrell.com
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