A Look at The Merger and Acquisition Process
Jan. 28, 2022
As with most things in business, mergers and acquisitions begin with a strategy and end with implementation. In between, there are multiple steps necessary for success, including careful planning, intuitive evaluation, due diligence, and financing.
Although mergers and acquisitions can be complex, their benefits are worth the effort. They can provide economies of scale, increase access to unparalleled talent and new markets, diversify risk, and boost the value of all businesses involved.
Mergers and acquisitions require strict legal compliance—this is where an attorney can help. At Coppaken Law Firm, our team has the experience to view mergers and acquisitions through the eyes of both business people and lawyers. That background may make the difference between a smooth process and a bumpy one. If you are considering a merger or acquisition in Overland Park or anywhere in the Kansas City area as a whole, reach out to us.
What Is Involved in The Merger and Acquisition Process?
Mergers are the consolidation of two or more companies into one. Acquisitions are the purchase of a company by another. The latter may be friendly or hostile; however, the end result is the same.
Either process involves 10 key steps:
Step 1 is developing a strategy by setting goals for what the merger or acquisition would achieve, such as offering entry into a new market or access to new products and services.
Step 2 is establishing the criteria for the merger and acquisition search, including the profitability of a company or its product line.
Step 3 is identifying companies that match target goals and evaluating their viability for merger and acquisition.
Step 4 is reaching out to companies that match the established search criteria to assess their interest in a merger or acquisition.
Step 5 is reviewing financials and other information to assess the value of prospective companies by creating multiple valuation models.
Step 6 is making an offer to the target company so negotiations and due diligence can commence.
Step 7, due diligence, begins if the target accepts the offer. Depending on the nature of the companies, compliance can be a thorny legal issue. Working with an experienced mergers and acquisitions attorney will make the due diligence process far less stressful and far more effective than doing it on your own.
Step 8 is creating the sales contract, including details about the nature of the purchase agreement. A business law attorney can help you negotiate the terms of the agreement, addressing the details of how the purchase will be made. For example, will you purchase assets or shares? How will the names of the original companies be handled? Will you need non-compete and non-disclosure agreements from employees to protect work products, confidential information, and trade secrets? This is a major step in the process and one where an experienced mergers and acquisitions attorney can provide tremendous guidance and assistance.
Step 9 is completing the strategy for financing the merger or acquisition.
Step 10 is closing the sale and fully executing the merger or acquisition. This is also where an attorney can help by making sure the transaction is fully compliant with the law. The new company can, then, begin implementing strategies to reach desired goals and outcomes.
What Are the Potential Pitfalls in Mergers and Acquisitions?
Mergers and acquisitions can be unsuccessful if they encounter pitfalls during the process. The companies may not have the proper synergy; stakeholders, including investors, leadership, and employees, can lose trust and take actions that undermine the process and the companies involved; financing could fall through; joint ventures may fail to reach the growth and profit goals intended.
The most common pitfalls occur when due diligence is sloppy or incomplete. Due diligence is perhaps the single most important step in the process. This is where you must thoroughly investigate the target company, verify the preliminary information it provided, and assess its viability in relation to the goals you set for the merger or acquisition. Moreover, it is the stage at which you must protect the information critical to the success of the target venture.
The strategic goals you establish for a potential merger or acquisition define where you want the company to end up. The legal, financial, disclosure, and protective details during the process demand the time and attention of an experienced mergers and acquisitions attorney. Even if you have in-house legal counsel, this process requires special assistance.
Let Coppaken Law Firm Help You
At Coppaken Law Firm, our lead attorney began with a decade-long career in business before completing law school. That experience makes this firm uniquely suited to represent clients in Overland Park, Johnson County, Jackson County, and the surrounding areas in Kansas and Missouri. Partner with us before beginning the process of partnering with another company. Coppaken Law Firm is ready to put decades of experience to work for you, so contact now to schedule a consultation.