This is the final installment in my six-part series on the anatomy of an M&A deal from the buyer’s perspective. To read Part V, which covers closing considerations, click here.
You have identified a target business, completed due diligence, secured financing, and wrapped up negotiation and, after several months, the deal has finally drawn to a close. Congratulations: your real work has just begun.
The aftermath of a merger or acquisition (M&A) transaction is where buyers prove their mettle. Whether they succeed or fail, owners of new businesses typically do so in spectacular fashion. The outcomes of post-closing integration are largely contingent on factors hammered out in the deal, of course, but anything can happen regardless of your confidence in the terms of the merger or acquisition:
- Top talent could leave.
- Communication could break down.
- The company could miss important revenue goals.
- A third party could bring a major lawsuit against the current or former owners.
- The business climate could change irrevocably overnight.
While you may not be able to plan for every contingency, there are several steps you can take to reduce your overall risk—provided you start immediately.
Specify your integration plan and follow it to the letter. If you haven’t come up with a detailed integration plan, determine what is most important to the organization’s bottom line and determine clear budgets and goals around those customers, staff, revenue channels, and assets. It is never a bad idea to establish an integration team and write up a checklist. Make sure all members of the integration team understand their responsibilities. Overlapping roles and ambiguity surrounding leadership lead to inefficiencies and disputes.
Announcing the Deal
Build confidence among employees and quash any rumors or misinformation by announcing the deal as soon as possible. Keep in mind that any delay here will cause confusion and unrest. Through publicizing the merger or acquisition, you can invigorate investors, customers, and other stakeholders. The announcement will also give you a sense of external reactions in the market, so you can get ahead of competitors and media early.
Pacifying Key Personnel
As you institute new organizational structures, keep an eye on the old guard as well. People are essential to making any integration effort work. Aside from allaying any uncertainty customers and clients may express, make sure to build connections with department heads and talented employees and contractors. Remaining personnel can teach you about historical problems and patterns you may not have perceived during the earlier stages of the M&A process.
Master the Culture and Earn Commitment
Do not overestimate the importance of ongoing communication. Integration efforts often fall through when people involved in the organization are unaware of or unclear on what the new owner expects of them. Lack of communication can not only cause the organization to miss important goals and deadlines, but it may foment a culture of mistrust and apathy as employees believe they’ll soon be replaced or that their work doesn’t matter.
Remember to listen carefully and maintain an open mind. Address questions, respect earlier ways of doing things, and, to the degree which you are able, align your objectives with your team’s understanding of their business. Integration may be a painful process, as employees face new expectations as well as possible downsizing and termination. No matter what happens next, you will need to remain firm in your convictions, adhere to your timeline, and act quickly and judiciously to achieve a successful integration.
Addressing Legal Issues
There are a host of legal issues to address following the close of any merger or acquisition. You will need to review and reconcile contracts, intellectual property, compliance policies, pending litigation, and more. There may also be remaining closing provisions to address, and you may need to stay in contact with the seller during the first several months.
Regardless of the scope of legal issues ahead, buyers of all experience levels can benefit from partnership with business transactions attorneys like the ones at Offit Kurman Attorneys at Law. Since 1987, we have been working with clients to achieve their long- and short-term objectives. From pre-transaction planning to closing, we can provide you with the knowledge and confidence to succeed during every stage of the M&A process.
ABOUT MICHAEL N. MERCURIO
Business attorney and M&A lawyer Michael N. Mercurio serves as outside general counsel on matters related to business law, M&A, and real estate law As a strategic partner to firm clients, Mr. Mercurio regularly counsels entrepreneurial individuals and assorted entities on all aspects of business and commerce, with a core specialty in mergers and acquisitions—both from the sell side perspective and buy side perspective.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eight offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.
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