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For
Sellers
Lawyers…
Your M&A Friends!
Repeat after me -
"Lawyers are your friends," especially when selling your business.
While all entrepreneurs
want to minimize legal costs associated with the sale, experienced M&A
attorneys bring value to the transaction not available from anyone else
on your team, including in-house counsel if one is employed.
M&A counsel will advise
on a host of issues inherent to the sale - representations and warranties,
indemnity, assumed or excluded liabilities, post-transaction adjustments
and escrow accounts, for instance.
- Buyers naturally
want you to earn the value they pay for your business. Purposely or
inadvertently, they can erect barriers to obtaining maximizing consideration
at closing. Lawyers work to tear down those barriers, or at least help
you make sense as to why they exist.
- Law firms in the
practice of M&A usually have savvy tax attorneys schooled in the art
of tax minimization as a result of the sale transaction. Choosing the
correct deal structure can enable sellers to keep more of the proceeds
from the sale.
- M&A attorneys spend
much of deal negotiation in protecting and preserving the consideration
paid to selling shareholders from being recouped by buyer. Lawyers will
help you allocate as much of the deal risk to the buyer, while limiting
seller exposure to post-transaction recoupment claims.
- Experienced M&A
counsel is familiar with current market conditions for various deal
terms (such as indemnification caps, minimum thresholds and earn-outs)
and can assist you in determining the reasonableness of buyer requests.
- Attorneys provide
a useful foil to negotiate with the buyer and its counsel, allowing
you to probe the buyer's position and then emerging with a compromise
that you can live with (and the attorney can absorb any ill-will for
overreaching).
None of the above
means that your legal checkbook must be open-ended. Try to get a budget
range from legal counsel for the acquisition project prior to signing
a letter of intent with a buyer.
This may be difficult
for counsel as many variables can occur, but least understand the relative
cost of such variables. One example is the need to construct a 'disclosure
document' for shareholders in your company, under requirements from federal
securities regulations.
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For
Buyers
Talk
About It
Just like the selling
of your products, executives in the buying company need to 'sell' employees
of the seller on the merits of the transaction.
Where possible, salesmanship
in this form needs to take a particularly human quality rather than an
impersonal business one. Speak to the emotion that selling employees may
well feel toward the loss of certain colleagues, the departure of their
prior company's owners, and the coming strangeness of new systems, people
and priorities.
At the same time,
reinforce the value of the acquisition, highlighting these attributes:
- enhanced career
opportunities
- discounts on buyer
company products
- additional educational
benefits
- new technical,
marketing and management challenges
- improved, employee
benefits
Good M&A communications
from the buyer also require structure and speed. Be sure to adhere to
the following points:
- Over- communicate,
and do so early in the process. Do not assume that the obvious is apparent.
- Precede external
M&A announcement with internal ones; employee trust can be built right
away with this simple gesture.
- Educate your own
and seller employees. Considerable effort should be spent on telling
each others' workforce about the buyer/seller.
- Schedule time in
your joint, post-transaction management meetings for communication issues.
Collaborate on how to address rumors.
- Publish a 'merger
newsletter,' addressing the issues of introduction, integration and
education, that is sent electronically to employees in both companies
for at least a few months after closing.
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