Mergers and acquisitions

Mergers and acquisitions (M&A) and corporate restructuring are a big part of the corporate finance world. Wall Street investment bankers routinely arrange M&A transactions, bringing separate companies together to form larger ones. A merger is a combination of two companies, an acquisition is where one company buys another.

Completing a merger or acquiring another business is a major event for any company. Such transactions often have dramatic implications for all stakeholders -- owners, management, employees, and even customers. Even the early stages of exploring a potential merger or acquisition may require legal preparation.

Some important legal considerations include:

Due Diligence. 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. 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 the company’s corporate governance documentation, 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.

Corporate Governance. One of the critical areas of due diligence is corporate governance. This requires the seller to open its incorporating documents, bylaws, minutes from board meetings, shareholder materials, locations where it does business, any previous deals, changes in control and corporate reorganization, stock transfer ledger, organizational charts, policy manuals and corporate codes of conduct, press releases, and bank accounts. Again, timely and complete disclosure by the seller will help close the deal and alleviate any fear on behalf of the acquirer of unexpected problems.

Taxation. Major corporate transactions like mergers and acquisitions often carry with them significant tax implications for all entities involved. Accordingly, tax lawyers should be closely involved in structuring the transaction, so the entities can take advantage of tax-preferred structures and avoid unnecessarily expensive tax loads.