Timeline for the Legal Aspects of Mergers and Acquisitions
A successful merger or acquisition can be a lengthy process; it is the result of months and sometimes years of careful analysis and planning. While the specific circumstances surrounding each transaction drive the required tasks and the timeline, there are some common legal aspects of mergers and acquisitions that are generally applicable across transactions.
- Structuring the deal. A significant amount of work typically goes into coming to an initial agreement with a target company. In structuring the deal, businesses should consider many factors, including tax and accounting implications, risk management concerns, regulatory issues, antitrust laws, market conditions, forms of financing, forms of payment, and other commonly negotiated deal points. Ideally, the acquiring firm makes an offer and the target firm accepts it. In practice, negotiations to get to an accepted offer can be prolonged and can sometimes fail, in which case the acquiring firm may decide to approach the next organization on its list of target candidates.
- Due diligence. The initial planning stage helps identify potential targets based on publicly available information but does not seek to evaluate the target company’s finances, customers, strategic fit, contracts, employee/management issues, legal matters, tax matters, environmental issues, and governmental or regulatory issues. These tasks are all part of due diligence activities. Conducting thorough, targeted due diligence on a potential target company is arguably the most important part of the merger and acquisition process. Due diligence can help acquiring companies avoid potential financial, legal, and regulatory problems later. Generally, due diligence doesn’t begin until after an offer has been negotiated and accepted and should be completed prior to entering into legal contracts.
- Purchase and Sale contracts. If due diligence does not uncover material issues, or if all potential issues uncovered during due diligence have been addressed to the acquiring company’s satisfaction, the two companies can sign a final purchase and sale agreement.
Baer Reed assists law firms and corporate legal departments with a variety of due diligence tasks and other legal support services, helping ensure the legal aspects of mergers and acquisitions are conducted in a timely and efficient manner. To learn more, contact us today.
- On July 23, 2018
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