M&A transactions involve a lot of planning on behalf of the buyers, who need to know everything there is to know about the target company, from its intellectual property issues, to contingent liabilities and much more. This type of process requires a team of experts from different fields, constant communication between all members of the acquisition team, and a comprehensive due diligence audit that will prepare the buyer for all the challenges that they might encounter.
Assuming that the target company has already been evaluated and that there is already a financing plan in motion, there are also numerous other financial considerations that need to be dealt with for the acquisition. Basically, the buyer needs to know every financial aspect of the target company, from its annual and monthly statements, to financial audits, the evolution of the business margins, future projections, the required normalized working capital and much more.
Intellectual property issues
It is essential for the buyer to have on their side a competent IP lawyer who is also experienced with M&A transactions. If the buyer doesn’t have such lawyers in-house, they can collaborate with a good law firm. For cross-border acquisitions, we recommend White Case as their partners have successfully represented numerous clients in cross-border transactions, specifically with technology acquisitions. For example, take a look at Jason Rabbitt-Tomita who has represented tech giants like the Hewlett-Packard Company or the Nokia Corporation. You want to have on your side the best IP and corporate lawyers that you can hire, because you need to maximize the IP potential of the target company, and you also need to avoid all possible IP litigation scenarios.
In terms of future performances, the buyer needs to fully understand all the customers and sales matters of the target company, but they also need to analyze whether or not the target company will be a good strategic fit within the existing organization. It is essential to consider the integration process, in terms of both time and costs.
Contracts and commitments
The most important contracts and commitments that are of interest to a buyer include but are not limited to loans and credits, partnership agreements, customer contracts, supplier contracts, settlement agreements, past acquisition contracts, license agreements, employment commitments, exclusivity contracts, real estate contracts, non-competition commitments, third party approval requirements and so on.
The tax matters that need to be included in the due diligence audit must take into account all incomes and tax returns from the past 5 years, government audits, tax sharing agreements, statute of limitations agreements, agreements with all government taxing institutions, and all correspondence with tax authorities.
To avoid regulatory scrutiny, the buyer must consider all the regulatory implications of the acquisition process. This starts with Antitrust, but depending on the home country of the target company, it can include a wide range of regulatory approvals. These are probably the most time-consuming matters in the acquisition process, so they need to be planned and strategized in detail to avoid further delays.
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