M&A transactions are generally the biggest and most complex deals. So, A company makes its initial contact with a target, right through to closing the transaction (and sometimes even after) there are numerous legal aspects of mergers and acquisitions that a firm must handle. Apolo Lawyers (+84) 903.419.479 will provide legal services that help our clients reduce the risks when conducting an M&A transaction.
Our law firm worked with dozens of companies conducting M&A and below we look at what we believe to be key legal aspects of the M&A process:
During a merger or acquisition, both the selling and the acquiring company must conduct due diligence. For sellers, this means taking the necessary steps to maximize the value of the company and closing the deal. In order to accomplish these goals, the seller must produce complete and accurate documentation. The acquiring company must then review and analyze the documentation to assess whether it supports closing the deal and to identify any red flags or risks. The information the seller needs to provide often includes all corporate governance documentation of the company , financial liabilities, capitalization schedules, tax information, operating information, customers and vendors, personnel and labor relations, payroll and benefits, real property, intellectual property, research and development, contractual rights and obligations, and any other special industry considerations. A due diligence lawyer can help you with this step.
The term “deal structure” tends to make people think of financial structures, earn outs and divisions between cash and equity. The reality is, that a deal structure is as much legal as it is financial. For example, whatever structure is agreed to in the deal, important legal issues need to be considered, including shareholder approval, the tax consequences of the structure agreed to, transferability of liability, third-party contractual consent requirements, and foreign regulatory issues (if applicable). Deciding whether to buy the company or just its assets (thus, not taking on any of its liabilities) is another consideration that corporate M&A lawyers will advise on.
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A working capital adjustment is considered a part of the purchase price within the merger and acquisition transaction processes. Acquiring companies must always ensure that their target company has adequate working capital in order to be able to deal with all obligations before and after closure.
Adjustment of working capital helps to avoid problems like acceleration in debt collection, or delayed inventory purchasing.
Certain unusual and eccentric factors are considered part of the working capital calculation, these include one-offs and cyclical items. There are many details to the merger and acquisition process, regarding both the laws or the transaction process, so anyone who is willing to go through it should give it enough time in order to do it the right way.
This is one of the key legal aspects of Mergers and Acquisitions. Joint or several liabilities is an extension of the target indemnification issue. It asks: Which of the target of shareholders does indemnification apply to, and to what extent. In the case of joint liability, each of the target of shareholders is fully liable for any future damages.
In the case of several liabilities, each of the target of shareholders can be liable only to the extent that they are seen to have contributed to the damages.
Read more: Why is legal due diligence important?
Read more: Noteworthy points when signing an M&A contract
The importance of how the payments are processed for the transaction shouldn't be neglected. The two ways of payment processing are:
Cash - The easiest method of payment, the safest payment method for the acquired company, and a very easy and flexible payment method for the acquiring company.
Equity - The acquiring company pays its equity, issuing to the stockholders of the acquired company at a certain ratio relative to the value of the company. Issuing equity may reduce all costs of debt financing by improving the debt rating of the acquiring company.
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Identify the business of objectives
Identify the legal issues - these vary depending on factors like whether the deal is friendly or unfriendly
Build a “road map” for the client from start to finish, and include a timeframe.
Advice on the deal and negotiating tactics
Conduct due diligence on another side.
Determine - with the help of tax attorneys - the tax implications and if they require special structuring
Work with antitrust attorneys to assess regulatory obstacles, gain regulatory approval and analyze any other required regulatory approvals. If cross-border, work with local counsel. Review all the contracts of client: business, employment, outsourcing, debt instruments, preferred stock, etc.
Obtain third-party consents from lenders or parties to other contracts.
Negotiate agreement, sign, announce publicly, close the deal.
Attorneys for the target decide whether to negotiate, refuse overtunes of the buyer, sell, or do a deal with another company.
Apolo Lawyers is a law firm that has an experienced attorneys team will help clients with legal needs relating to mergers and acquisitions. So, if our clients need any help, don’t hesitate to contact us via email at contact@apolo.com.vn or Hotline – (+84) 903.419.479 for the best legal advice and support.
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