Selling a business can be an exciting yet stressful time. Along with a skilled, business-focused CPA, investment banker and business broker, many owners need a legal adviser to help guide them through the steps. It’s beneficial to have the skills of a business attorney specializing in mergers and acquisitions to help navigate and close the deal.
Role of the Mergers & Acquisitions Attorney
The M&A attorney’s role is to inform and educate regarding demands, expectations and day-to-day objectives while preparing the company for sale. They ensure corporate regulations are observed and outside relationships are formalized. A business lawyer identifies potential risk areas and manages the sales process, ensuring clients successfully sell their businesses.
Engaging legal representation generally commences after the key commercial or business terms have been negotiated. For example, deal specifications such as purchase price, payment terms and assignments of any liabilities may have been established. However, if these points remain open, a business owner can utilize an M&A lawyer in all aspects of the transaction, including initial deal points and scheduling the timeline to consummation.
A few examples of an M&A lawyer’s specific functions are below:
- Prepare a checklist for the client outlining action items and deliverables
- Legal due diligence to further understand the sell-side transaction and any risks associated with it, including the identification of any liens, debts, litigation and other liabilities
- Draft and negotiate the definitive sale agreements, letters of intent and memoranda on the deal
- Support and advise during open negotiations through post-closing
- Respond to and manage buyers’ attorney comments and questions
Key M&A Words & Definitions
Get prepared to sell your business by understanding a few of these important terms:
- Acquirer: The buyer is the person or entity purchasing the company’s assets and/or equity.
- Capitalization: Term used to describe a company’s permanent capital, long-term debt and equity.
- Deal structure: Typical deal structure may include stock, assets, seller debt, earn outs or other valuables besides cash. The complex nature and potentially varying forms of deal structure are why middle-market professionals like investment bankers, brokers, business tax professionals, and M&A attorneys are often hired.
- Due diligence: In the process of an acquisition, the acquiring entity is often allowed to see the target entity’s internal books, operations, and internal procedures. The acquiring entity reviews all areas of the target to satisfy their interests. Offers are made contingent upon the resolution of the due diligence process.
- Letter of intent (LOI): Letter agreement, with both binding and non-binding elements, signed by both buyer and seller which contains significant commercial or business terms and provisions of a contemplated deal.
- Term sheet: A document outlining the key terms of a proposed transaction. The term sheet is typically nonbinding, except for certain provisions.
Learn more M&A legal jargon here.
Attorney Mathew B. Rabin helps clients sell their businesses by keeping their specific goals in mind. We welcome inquiries from California-based business owners. Find out more by filling out the online contact form.