When To Hire a Mergers and Acquisitions Attorney

As a business owner, a merger or acquisition is a defining event in the life of your company. Regardless of the type of deal, legalities shape every aspect of an M&A transaction, and the legal issues are very different from other business challenges.

An M&A attorney will help you through the process to avoid costly errors and ensure a desirable outcome for your business. If you have an upcoming M&A deal, talk to a local M&A attorney for legal advice.

Benefits of Using an M&A Attorney

A strategic M&A deal can reap multiple benefits for your small or midsize business, including:

• Economic growth and capital gains
• Geographic expansion and improving economies of scale
• Diversification of business partners and workforce talent
• Improving your competitive advantage and increasing efficiency

But with these potential rewards come potential risks. There are many moving parts to manage in the M&A process, and it’s not something a single business owner can do alone. Key players include your company’s leadership, accountants, investment bankers, and attorneys.

There will be some overlap among transaction team members. However, only experienced mergers and acquisitions lawyers should handle the legal aspects of an M&A deal, says Pete Faust, a lawyer in Milwaukee, Wisconsin, with decades of experience helping businesses through mergers & acquisitions.

Consulting with an M&A attorney can ease that burden, and earlier is always better — ideally before the letter of intent is negotiated and signed.

“You’ve got to continue to run your business during a prospective sale process,” says Kenneth M. Silverman, an M&A attorney at Olshan Frome Wolosky in Manhattan. “Attending to everything that’s related to the transaction can be full-time job number two.”

Don’t Do M&A Due Diligence Without Legal Help

Agreeing to major provisions is especially inadvisable if done before the due diligence process, an important aspect of any M&A deal.

“It’s the investigation that you make of the seller and all its attributes—looking at contracts, commercial relationships, workforce status, labor relations issues, employee benefits issues, environmental issues, all those sorts of things,” says Justin G. Klimko, an M&A attorney at Butzel Long in Detroit.

“If your corporate records are a mess, that can lead to due diligence questions by the other side. It’s not something you can clean up and fix right at the beginning of an M&A process,” adds Silverman.

“You’ve got to identify the assets of what the buyer is acquiring, and that buyer wants to make sure they understand what the company’s about, what they own, what the status of their commercial relationships are, and what the status of their legal protections are,” says Klimko.

Laws Govern Every Aspect of an M&A Deal

Complex laws and regulations shape every stage of an M&A transaction. A qualified attorney will leverage their years of experience to provide legal services essential to your M&A deal, including:

• Advising on deal structuring/restructuring
• Reviewing the letter of intent (LOI)
• Conducting due diligence before finalizing a buyout
• Assessing the target company’s legal liabilities and financial risks
• Overcoming regulatory hurdles and compliance, including antitrust and competition issues
• Securing your company’s intellectual property rights during a transaction
• Negotiating the final purchase agreement
• Advising on post-deal integration
• Representing you in any M&A-related business litigation

Faust says that without a lawyer giving input in these various aspects of an M&A transaction, you’re operating in the dark and putting your business at risk.

How Soon Should You Hire an M&A Lawyer?

“The earlier, the better,” Faust says. That being said, he acknowledges that some may prefer to wait to hire an attorney. “I understand that some sellers or buyers might want to cut costs by bringing attorneys in later in the M&A process. But even though it sounds counterintuitive, if you want to save money on legal fees, get your lawyers involved sooner.”

“If you’ve never done it before, there are dangers,” adds John P. Kanan, an M&A attorney at Honigman LLP in Detroit. “Some clients agree to things in early discussions that make total sense to business owners but make the lawyers and accountants cringe.”

Get Legal Help Before Signing a Letter of Intent

Take the common starting point: The letter of intent (LOI). “The LOI is nonbinding, typically, but it has a tremendous amount of inertia,” Kanan says. For example, if the seller requests that there’s no working capital adjustment so they feel more secure about what they’ll get in the end, the buyer may agree just to get the ball rolling.

“I’ve seen plenty of situations where there were provisions in the LOI that the clients didn’t fully understand and would not have accepted had they understood the issue,” says Faust. “Perhaps the form of LOI was used in a prior M&A transaction, but wouldn’t be suitable or appropriate to the current transaction.”

“And once it’s in there, it’s hard to renegotiate such a large point,” Kanan says.

It’s Hard To Change an LOI Once Signed

“It can be awkward to modify or delete key provisions in the LOI, even though the LOI is a non-binding agreement,” says Faust. “Even worse, it can hurt the credibility of the party seeking the change and put the deal at risk. Neither party wants to be accused of trying to renegotiate the deal, even though that may not be the intent.”

And while most aspects of the LOI, especially the sale price, are subject to due diligence, some terms — like exclusivity periods and confidentiality — are binding, says John J. Crowe, M&A attorney at Pryor Cashman. “The first thing you need to do is check with your tax group. The way the deal is structured could have different tax implications.”

The upshot is to consult with an experienced M&A lawyer before signing anything in the transaction.

The Legal Services an M&A Business Lawyer Provides

A big part of an M&A attorney’s value is in explaining your options to address problems that may come up in the M&A transaction. “Sometimes you’ll find a showstopper, and the deal will fall apart,” Klimko says. “Oftentimes, you’ll find things that need to be addressed, but they don’t rise to that level.”

Because these deals can involve everything from real estate to tax planning to intellectual property, M&A lawyers usually work with a team of specialists. “You have to pull together people with lots of different expertise in order to be able to evaluate the universe of potential problems that might arise,” Klimko says.

The job of the M&A lawyer is to essentially quarterback the whole deal and negotiate with all the parties involved until it’s time for the final purchase agreement. “The bulk of the purchase agreements can run between 30 and 100 pages, and each specialist might be responsible for four or five pages, but the M&A lawyer writes two-thirds of it and is primarily responsible for the whole thing,” says Kanan.

Having Competent Legal Counsel Benefits Both Sides in an M&A Transaction

“Sometimes a client will tell you, ‘This is great, the other side is going to have their family lawyer involved in the sale process.’ Well, yes and no,” says Faust.

“There are certainly issues that a lawyer with no experience in sale-of-business transactions will miss, but you may also get bogged down in issues you wouldn’t otherwise. Ultimately, it might be much more difficult to get the deal closed. Personally, I’d rather be against very good lawyers on the other side who know what they’re doing.”

How Long M&A Transactions Take

It can vary from a month to years, but a common timeframe is 90 days. “Some deals require regulatory filings, which can be a delaying factor,” Klimko notes. “There are a bunch of things to take into account when you map out a transaction and plan the timetable.”

An important thing to take into account is who knows and when. Word of a deal can cause ripples with employees, customers, suppliers, and others. “Also, sellers sometimes don’t appreciate how much of their time is going to be taken up doing deal stuff as opposed to running their business. And if the business doesn’t perform, the buyer might make a price adjustment,” Klimko says.

Get a Lawyer with M&A Experience

While a business owner may already have a go-to attorney, it doesn’t mean they’re right for a merger or acquisition. “Make sure you’re using a legal team with experience in M&A transactions specifically,” says Faust.

That may seem obvious, says Faust, but he has seen many sellers over the years rely on someone “who may be an outstanding business law attorney and a trusted adviser, but has little experience in these types of transactions, which can really hurt the process.”

Lawyers lacking experience in M&A run the risk of missing critical issues that will potentially disadvantage your business. “They also tend to raise issues that, to an expert in the area, are non-issues,” Faust adds. “As a result, you can get caught up in negotiating issues that experienced lawyers would resolve easily or not even raise. So, getting a lawyer with experience selling or buying a business is crucial to getting a deal done and getting it done right.”

“If they don’t do a lot of M&A, or they dabble, it can be an issue,” Kanan says. “The way transactions were done 10 years ago is much, much different than the way they’re being done now.” Having someone with a network of connections for advice on tax structuring, labor issues, employee classifications, and integration issues is also crucial, he adds.

“It’s certainly important to have experienced people working on your deal, because there are a lot of things that can derail a transaction,” Klimko agrees. “At the end of the day, the parties are trying to get to the same place. It’s just a question of how you get there.”

Find Legal Help

Use the Super Lawyers directory to find a highly experienced mergers and acquisitions attorney in your area.