Business Law 101: A Step-by-Step Overview of the M&A Process

As a business progresses through the years, it often makes sense to grow through the merger & acquisition (“M&A”) process. This is when one company merges with, or buys out, another one. An M&A can help quickly expand into new territory, acquire specific resources, or any number of other things that will help the business succeed going forward. While mergers and acquisitions aren’t uncommon, they are often complicated so it is important to have an understanding of what is involved before taking on this task.

Identify a Target Company

Perhaps the most important part of any merger or acquisition is finding the right company to target. If you target a company that ends up not being a good fit in the long run, it can cause a lot of major problems. Make sure you look for opportunities that fit your goals for today and long into the future.

Begin Gathering Information

Information gathering is essential to a good M&A. Once you have a target company in mind, you will need to begin gathering information about them. This can be done through online research, looking at public records, and even visiting the locations. You will also want to contact the owner of the company to start gathering additional knowledge, and determine their interest level in an M&A.

Sign a Non-disclosure Agreement

If the opportunity still seems like a good one, it will be time to sign a non-disclosure agreement (“NDA”). This is a legal contract that prohibits either party from sharing the information they gain while conducting further research, negotiations, and other actions related to the M&A. This is critical because it will allow both companies to freely share details of their products, financials, and other things that are needed before making any final decisions.

Submit a Letter of Intent

A letter of intent (LOI) is a written document that includes an offer for the merger or acquisition. At this stage, the offer will typically be a valuation range and not a specific price since additional negotiations will need to be done. An LOI helps to formalize the deal further and serves as a starting point for further negotiations.

Negotiate a Deal

The management and ownership teams of each company will have to conduct meetings to gather detailed information and negotiate the terms of the deal. This can be a lengthy process, but in the end, it will result in the creation of a purchase agreement. The purchase agreement will formalize the deal and create a legally binding contract.

Get the Legal Help You Need

A merger and acquisition is a major event in the life of any business. It will have many legal requirements and ramifications throughout the process. With that in mind, you should have an attorney working with you from the beginning. If you’re thinking about conducting an M&A, please contact us to schedule a consultation today.