Selecting a Lawyer for California Business Merger or Acquisition
Why is the selection of your attorney in a business merger or acquisition such an important element in these legally and financially complex transactions? What are some of the most important roles your attorney should provide as you approach the acquisition of the assets or stock of another company or a potential merger?
It is important to note that several recent studies conducted by the government and major business-focused and well-known collegiate institutions have shown that the failure rate in a business acquisition is 70% to 90%. What are the primary reasons for failure in a business merger or acquisition, and how can the selection of your attorney contribute to a successful transaction?
The two primary reasons for failure in an acquisition or merger are a lack of due diligence and the failure of the associated organizations to integrate the business operations and culture of the entities following the transaction. Look for a San Diego and Southern California law firm with significant experience in these transactions over a period of several decades. There is a rigorous process that your attorney should lead as you work through the transaction, from initial negotiations and tentative agreement to the consummation and, ultimately, aftermath of a business merger or acquisition.
A merger, asset purchase, or stock purchase can be an exceptional strategy for improving the business capabilities and capacities of the parties. It can also be a potential source of litigation if the concerns of minority stakeholders and lien holders are not balanced as part of the equation.
It is not uncommon for lien holders and disgruntled stakeholders to claim the transaction is intended to harm the position of the lien holder or to escape financial or legal obligations.
Due diligence is the central element of any business merger or acquisition. Your attorney should have a well-developed strategy including substantial checklists which guide each phase of the transaction. The primary issue in an asset purchase is to ensure the ability of the seller to deliver clear title to the asset(s) and to resolve any existing liens, encumbrances, or potential liabilities which might be associated with the transaction.
A stock purchase places the buyer(s) in the shoes of the seller(s). These transactions are fraught with risk and require verification of the Warranties and Representations of all parties. It is important to validate current trends in the marketplace and to investigate how recent developments, such as the loss of major customers or a change in the industry, may impact future operations of the target acquisition.
Another principal concern in these transactions is the transfer of “goodwill” or the value of the target based on its reputation, brand, intellectual property, and branding. It is important to consider the verification of existing key customers and internal personnel and how these will be secured through the transition period. Negotiations should also include mechanisms for balancing unforeseen contingent liabilities, inaccuracies in business-related figures and financial data, as well as incentives for the successful transfer of goodwill on the part of the seller.
Your experienced mergers and acquisitions attorney should be a positive force in maintaining the atmosphere of “the deal” while protecting your interests throughout the process and in the months and years which follow. An experienced acquisitions lawyer brings insightful knowledge, real-world perspective, sound due diligence checklists and practices, and the legal experience required to resolve potential disputes and help you to achieve your goals and objectives for any merger, asset purchase, or stock acquisition transaction.
