In this blog post, Deepak Gupta, a student pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes the role of a lawyer in mergers & acquisition transactions.

 

Role of a Lawyer in Mergers & Acquisition

• The lawyer is an important advisor to both buyer and seller and plays a key role when it comes to legal issues like mergers & acquisitions. Each side, either of the parties has a lawyer of its own.

• The lawyer who is dealing on both the sides has to have a deep knowledge of the subject that he is dealing with and should have all the basic laws in the mind and should be able to apply them in his practical life in the companies that he is working for.

• Lawyers for both sides work together and craft the details of the purchase agreement. These agreements are very risky and often utilize complex terms and phrases, so, the best thing you can do is to let the lawyers do their task and draft a document they think makes sense.

• Lawyers negotiate with people and gain the target parties’ impression and that’s how they deal with their clients and prolong the business without any hurdles. Communication is the important thing that a lawyer has to deal with their clients and on behalf of the company he is working with.

RED LINE refers to an edited document or a draft that retains like an edited text.

• The other side’s junior associates, also sweet, caring and utterly passive creatures, undo the changes and revert back to the original text. This juniors’ e-mailing can continue and because these juniors often prefer the easier e-mail route to have a conversation. Coincidentally or not, this to and fro also results in running up the legal fees of Buyer and Seller.

• Of all the advisors, lawyers are prone to try to take over the process of the task that has been taken. Keep your lawyer focused on negotiating skill on the legal terms of the purchase agreement and the sale agreement and leave the “negotiation on business” to your investment bankers.

Whether the markets are up or down, whether the economy is expanding or contracting, Mergers & acquisitions are an essential part of growth for any company.

Irrespective of the market condition, the mergers & acquisition is the field which always has a growing strategy for a company.

In the last five years, firms have worked on around more than 400 mergers & acquisitions, totalling more than $145 billion of completed acquisitions. And the full spectrum of players in such deals is represented, including:

• Mergers and acquisitions include many aspects like – Acquiring Companies, Target and Selling companies, Boards and Special Committees, Financial Advisors, Investment Bankers, Majority and Minority interest holders, Dissident Shareholders, Partnership Interests.

Clients look for help in every transaction. Every factor should be kept in mind and given chance to the transactions that a lawyer is dealing with due diligence including financing, regulatory approval, valuation, operational issues.

• A lawyer in a company has to have an ability to deal with all size of businesses and should encompass every method of buying and selling of the companies and companies assets like – Auctions, Spinoffs, Restructurings, Divestitures, Buyouts, Negotiated stock purchases, Cash transactions, Tender offers, Going private and management buyout transactions, Exchange offers.

In addition,an emerging brand of consolidations in which multiparty acquisitions spawn the creation of a new public company has been initiated.

• Client Diversity is the most important aspect a lawyer should possess.

The transactional practice is very diverse and therefore it is represented as public companies and the private companies in their activities. Public clients are global in nature and have acquisitions in domestic and international energy companies.

• Work with private companies in their purchases, sales and investments in companies and assets span multiple industries. Frequently the transactions are handled that take place within the energy industry involving a variety of equity interests and stakes in master limited partnerships (MLPs).

• Mergers & Acquisition work involves companies and assets in a wide industry spectrum including:

1. Biotechnology
2. Banking and Financial Services
3. Alternative Energy
4. Airlines and Transportation
5. Energy Experience
6. Waste management
7. Venture capital
8. Utilities
9. Telecommunications
10. Software and technology
11. Retailing
12. REITs and REMICs
13. Real estate
14. Private Equity
15. Mining
16. Manufacturing
17. Information Systems
18. Hospitality
19. Hedge Funds
20. Health Care
21. Food and Beverage
22. Energy
23. Construction
24. Building Materials
25. Life Science

• Private companies often deal with tax implication on the transactions where the shareholders sell their interests in their small family businesses. Lawyers offer them advanced tax planning by providing them the comprehensive deals.

• Lawyers in this mergers & acquisitions field gain a huge reputation for handling the asset purchases and sales for the business and to develop, explore, gather, market, produce transport etc. like resources are held up and are also reserved for the support.

• The transfer ship of highly equipped assets and the specialized assets transferring the rights over them gain much to the lawyers and the company that they are working for and also keep the clients with them from getting diverted from them.

• The lawyer can also be a partner in such business and develop the specialized and sophisticated tax allocations for the maximum financial returns, in turn satisfying all the requirements.

• In some specialized issues, involving the reserves and royalties etc. also requires to be satisfied and taken care of by a lawyer who is dealing with the mergers  & acquisition transactions.

• A lawyer shall also provide environmental, corporate/partnership, securities, antitrust, maritime, bankruptcy, litigation, international advice and support with respect to issues which may arise in the course of the transaction.

• Lawyers skills are highly helpful in accelerating the growth of the companies and the “strategies and the business combinations” formula should be kept in mind. He should also foresee the happening and the events that might take place as a consequence of these transactions.

The below-mentioned factors should also be kept in mind for the growth of the business and the companies.

In case of beneficial changes-

1. The changes in the law, application of such laws and elimination of any unwanted provisions in an agreement, consolidating a benefit plan in the acquired firm’s agreement.
2. They must also review the benefit plans of the buyers and sellers to determine if they are complied with the law and are running on the purpose which is to be fulfilled with a lawful intention.
3. Negotiation in such situations and regulating the situation with clients is the skill that lies with a lawyer.

In case of Environment-

Environmental risks and liabilities are to be born in mind of a lawyer from such sales or purchases or involving the multiple properties. The lawyer also shall review and resolve the dispute in case of any, if arises in the course of such transactions.

• Lawyers should be able to advice the directors of the company and the duties and liabilities are to be made understood by them in order to make fair deals.

• A lawyer should be able to defend in case any dispute arises and should also offend in case if anything is going wrong with his company which he is working for on behalf of the company. He should govern the transactional issues very keenly.

• The intellectual property is also put to confidential and to be used to the maximum benefit of the client for the development of intellectual property.

• The more experience a lawyer has in the selling, buying, developing, and real estate issues are the resources involving energy producing properties.

• Any business has tax implications and complications and should also know how to plan the financing, asset purchases and sales which sound well and should not have any adverse effects in the later stage.

• A lawyer should solely focus on the target clients and should communicate well while making deals and should not let the clients divert from the present agreements. That’s how a lawyer safeguards the interests of a client and don’t let him move or change his decisions.

• Properly structured mergers & acquisition deals help small business and companies become big and grow faster with the help of a lawyer who has the deep knowledge on the subject and can forecast the results which are apt to the business.

• Help clients to take risks and evaluate the risks and approach them if they want some assistance completing their transactions.

• Lawyers use their skills to help companies accelerate their growth through strategic business combinations.

The Most Efficient Lawyer who Deals with Mergers & Acquisition has the skills of:

• Strategic Thinking – The strategical thinking of a lawyer is necessary for the upgrade of a business or for the changes or expansion that is to be made in a business.

• Negotiation – Communication is the only way that a lawyer of a company makes a client from getting away or from discontinuance of an agreement made. A lawyer should be able to negotiate to keep in mind all the probabilities of a decision by members or directors of a company. A lawyer should have a passive voice behind the decisions of the company.

• Multitasking – At the same time, a lawyer should also multitask with a number of clients but not only focusing on one client but many but solving all the issues regarding the transactions.

• Delegation – A lawyer can also delegate the task which is to be done by him in various departments of the company according to the level of the staff and also delegate the work if he alone will not be able to tackle the work schedule.

• Organization – The organization of the work shall be a compulsory work that has to be done by a lawyer as a man of making decisions.

• Complex Drafting – Drafting at the same time should be easily understandable and also be impartial to either of the parties of the transaction.

• Attention to Detail– Each and every detail has to be kept in mind and all the required data is to be collected from the clients as well as the company he is working for.

Critically, the ability to work quickly, the lawyer shall not feel stressful dealing with numerous clients and shall not lose the ability to think and work quickly.

What do you think about the importance of a lawyer in companies growth? Drop a comment & share the article!!

 

[1] https://www.andrewskurth.com/practices-MergersandAcquisitions.html