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Legal issues to consider in a Merger and Acquisition transaction.

On Behalf of | Aug 17, 2016 | Uncategorized

Mergers and acquisitions take place for a number of reasons, from creating an economy of scale by combining operations, to product and service diversification, to capturing an increased market share, and many others.

From a legal standpoint, there are several things to consider that will require an experienced mergers and acquisitions lawyer.  The most basic of these is how the deal will be structured.  Generally, there are three basic ways to structure such a transaction.

Stock purchase – the buyer buys shares in the target company, in the process acquiring the assets and obligations of that company.

Asset purchase – the buyer buys some or all of the assets of the company.

Merger – the buyer agrees to enjoin the assets of both companies, creating a larger, more profitable entity better positioning it to do well in the marketplace.

Once a structure has been laid out, the acquiring company has a host of other legal issues to be resolved as part of the due diligence process.  Some things to consider will include:

Financial issues – Including a complete review of the company’s past performance, margins, projections, capital reserves and the condition of capital assets.

Customer relationships and sales – More than anything else, this will help determine the future financial health of a company.  Are there any ongoing disputes with customers or suppliers?

Intellectual property – What copyrights and trademarks does the company have, and how long will it be before they expire?  Does the company have any technology licenses, critical software needed for operations or other trade sensitive properties that are key to moving forward?

Litigation – What pending legal issues are facing the company?  Are there any anti-trust or regulatory issues?

Tax issues – have tax returns been filed for the past several years? Are there any ongoing audits?

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