Growing your business by merger or acquisition

The Process of Mergers and Acquisitions

In the early stages of a transaction, the first three phases are:

  • Pre-due diligence
  • Due diligence
  • Documentation

Due Diligence

The Due Diligence process itself is likely to involve the business owner’s lawyers and accountants setting up a “data room” where the key information that the buyer has asked to see is provided. These “data rooms” are now frequently online data rooms. The more organised the business is, generally the easier this process will be. Usually, the business owner will not want too many of its employees knowing about a potential sale. This can have an impact on the information gathering and often puts a greater burden on the owner. It is usually worth considering bringing some colleagues into the process to help ease that burden.

Documentation

Assuming that due diligence has progressed well, the buyer will then move to produce the first drafts of the main deal documents. The documentation is often produced at an early stage in the due diligence process so that negotiation of the documents can take place whilst the due diligence is ongoing. In most cases, it is going to be the buyer’s lawyer who produces most of the deal documents.

There will be a large amount of documentation involved, and these documents can take time to agree, which is why it is important to have expert lawyers and accountants instructed to guide you through what could otherwise be a difficult and protracted process.

The main document will be the acquisition agreement, but ancillary documents also play a vital role. It is important to avoid negotiating key documents at the last minute – preparation and planning is critical. Parties should draw up a detailed timetable and responsibility list which will be adhered to. When appointing lawyers, it is helpful to request a list of the documents that are likely to be required. This will give you an idea of what is involved in the M&A process and may also indicate to you how experienced your adviser is in disposals or acquisitions of businesses.

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