Buying or selling a business can be a daunting prospect; even more so if it is your own company being sold or if you’re a first-time buyer looking to do a bolt-on acquisition.
M&A is often seen as a process that is rife with complexity, the potential for disagreement, misunderstanding and poor execution. Yet by making sure a deal gets started on the right footing and keeping in mind certain key principles along the way then you go along way towards setting yourself up for success.
Set the tone
Get yourself and your team and encourage the other side and their team to get everyone into a fair and reasonable starting position. There will naturally be negotiation and discussions along the way, but aim to start out with neutral terms rather than heavily one-sided documents
Be a team
Make sure your advisers know each other and are coordinating. Have you introduced your accountant to your legal team? Does everyone understand the tone of the deal, including the other side’s advisors?
Consider what is proportionate for the deal’s size and complexity. This approach will limit unnecessary due diligence, help manage lengthy (i.e. costly) disclosure and reduce the number of turns made to the SPA. Challenge yourself, your advisors and the other side to keep things focused on the big picture. We’ve seen deals held up over things like a £500 tax discrepancy. At these times, it pays to be practical
Agree heads of terms
These don’t need to set out your position on every conceivable point, but you should aim to agree in sufficient detail the key commercials before you dive into the documents. This helps everyone focus on what’s important and identify deal breakers early on. Keep things high-level by taking an exceptions-only approach to everything else
Keep things simple
Deal fatigue kills deals. Encourage everyone to avoid unnecessary complexity wherever possible. Do you really need another agreement when something could be addressed as a separate clause in the SPA? (Your lawyers will provide guidance on this)
Single point of contact
Multiple lines of communication between parties and their advisors can lead to confusion. Decide who within the business is instructing your advisors and who among them is communicating with the other side
Keep up momentum
We’ve seen so many deals falter or unravel as time progresses. There is a real benefit in ensuring you and your advisors keep driving the timetable. At the same time, don’t unduly create time-pressures for your team or the other side. This is how mistakes are made
Don’t forget about tax
It’s really important to make sure you’ve got a good grip on all of the tax consequences of the deal, both for you personally, the company and the other side. Last minute tax planning is expensive and time-consuming
Your advisors are there to help you succeed. Lean on them and work with them to make the deal happen. It is often difficult to remember why you made certain concessions early on in the process. They’ll keep on top of this and lead the way through the detail, keeping you focussed on the biggest issues
Remember the day job
Deals can become a big distraction (and sometimes fall through). We’ve seen it happen many times, where senior managers (in a seller) get swept up in the deal and the business starts to suffer. If your numbers start to fall, a buyer may look to re-negotiate or pull out. That’s the purpose of having a strong advisory team on your side. You can trust them to look after your interests, freeing you to ensure the business continues to perform at peak levels
These top-tips have been pulled together with input from across our team of inhouse M&A advisers and reflect many years of combined experience. As inhouse advisers, our approach tends to vary from what traditional law firms do. If you’d like to know more about how we differ, you might find the other articles we’ve published on this subject on Lawskool of interest. Or feel free to give us a call
Written by Alex Melrose
Principal at My Inhouse Lawyer
One of our values (Growth) is, in many ways, all about cultivating a growth mindset. We are passionate about learning, improving and evolving. We learn from each other, use the best know-how tools in the market and constantly look for ways to simplify. Lawskool is our way of sharing with you. It isn’t intended to be legal advice, rather to enlighten you to make smart business decisions day to day with the benefit of some of our insight. We hope you enjoy the experience. There are some really good ideas and tips coming from some of the best inhouse lawyers. Easy to read and practical. If there’s something you’d like us to write about or some feedback you wish to share, feel free to drop us a note. Equally, if it’s legal advice you’re after, then just give us a call on 0207 939 3959.
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