Frequently Asked Questions About Mergers And Acquisitions In California
There are a lot of good reasons to buy or sell a business within the merger and acquisition process. However, the lack of due diligence can result in costly mistakes and regrettable outcomes. I am Jerry Goldstein, an experienced business law attorney. In my more than four decades of assisting clients with a wide range merger and acquisition transactions, I have seen more successful results than not.
Here are answers to a few frequently asked questions about mergers and acquisitions in California. For legal advice about this type of sophisticated business transaction, call my office in Palm Desert at 760-359-2233 or send me an online inquiry to make arrangements for a consultation.
What Legal Considerations Should I Keep In Mind Before Initiating A Merger Or Acquisition?
Before taking the leap and diving into due diligence, it is vital to a conduct a thorough assessment of the big picture. What risks are immediately obvious? If you are acquiring a business, you will need to know what type of a business it is. Is it a corporation? Limited partnership, limited liability company or another type of business entity such as a nonprofit corporation?
There are myriad regulatory compliance concerns relating to investment laws, securities and antitrust laws and potentially foreign exchange considerations. Do you know what they are? Where is the company domiciled? Is the entity qualified to transact business in California?
How Can A Skilled Business Lawyer Help Navigate The Complexities Of Mergers And Acquisitions?
A skilled business lawyer can help you determine if the cost of proceeding with the transaction is in tandem with the benefit of completing it. The process of due diligence can be expensive but could lead to a lucrative transaction now and in the future. Your attorney can explain the potential outcomes and protect your best interest by working with the investment bank or looping in an experienced financial adviser to speak to compliance when the transaction triggers antitrust laws, investment law, securities or matters involving the foreign exchange.
What Legal Steps Are Involved In Structuring A Successful Merger Or Acquisition Deal?
For corporations, the deal structuring will need to take into account how and when shareholder or board approval of the principal terms of the transaction will occur; how financing and asset distribution will be handled; what happens to the current chain of command, management systems, and employees.
Most important, regardless of the type of business entity, the form of acquisition is important, whether structured as an entity or asset purchase. In an entity acquisition, the acquiring party is subject to the risk of any undisclosed (or unknown) liabilities, and will not be able to depreciate any of the assets. On the other hand, in an asset purchase, the risk of hidden liabilities is significantly reduced and the acquiring party may depreciate the assets acquired after negotiating the allocation of the purchase price among the various assets (e.g., real estate, vehicles, furniture, fixtures and equipment, good will, etc.).
How Can Legal Due Diligence Mitigate Risks In Mergers And Acquisitions Transactions?
There are many moving parts to due diligence, including a meticulous review of the financial books prior to entering into the transaction. Are they accurate? How do you know? Along with accurate ledgers, obtaining a current valuation of intellectual property and licensing, liabilities and assets. What kind of past or potential regulatory concerns are on the horizon? Are there reputation costs due to lawsuits? Working with an experienced mergers and acquisitions lawyer can help you to ask the right questions and ensure the process of due diligence thoroughly addresses current and future concerns.
What Are The Legal Challenges Typically Encountered During The Mergers And Acquisitions Integration Phase?
If an integration strategy was not properly addressed earlier, it could take longer than expected to get rolling. Leadership may become disengaged with imminent layoffs as the company needs to address identical departments undergoing changes. Employee morale could hinder productivity as the uncertainty of taking on a new position or the possibility of having to leave the company stirs fear.
Let’s Talk Soon
Whichever side of the transaction you find yourself in the acquisitions and merger process, I can help you navigate through the complexities. Call the Law Offices of Jerry J. Goldstein in Palm Desert at 760-359-2233 or send me an online inquiry to schedule a consultation.