ACQUIRING A COMPANY FOR BUSINESS GROWTH

November 15, 2021

ACQUIRING A COMPANY FOR BUSINESS GROWTH

By: Melissa Balocca, Esq.

“How do you make money? Spinoffs, split-ups, liquidations, mergers and acquisitions.”

Mario Gabelli, CEO of Gabelli Asset Co.

When strategic growth is your goal, acquiring a business is the logical way to increase market power, gain new resources and distribution channels, and improve access to capital. Unfortunately, many buyers fail to implement the proper M&A framework necessary to ensure propriety and effective integration of the acquired company. This article outlines key legal matters to consider when planning for a strategic acquisition.

Preliminary Documents

Before the seller and buyer begin negotiating the purchase agreement, they should consider executing various preliminary agreements, such as: (1) the Term Sheet laying out the key terms of the acquisition before beginning due diligence, disclosures, and drafting, (2) a Confidentiality Agreement because the buyer will likely gain access to a lot of valuable private information about the target company, and (3) an Exclusivity Agreement should be considered to protect the buyer who is investing significant time and money to complete the purchase.

Do Your Due Diligence

Often completed in a perfunctory manner, due diligence is one of the most critical aspects of an acquisition. You do not want to wait until after the agreement is signed and purchase price is paid to discover unsavory aspects of the business such as unknown liabilities, unfavorable contracts, or tax issues! Before purchasing an existing business you should conduct a thorough and objective investigation of the target company’s financial statements, tax returns, vendor and employee contracts, lease agreements, and other important documents.

Assemble a Dream Team

With Balocca Law, you not only hire an experienced M&A attorney, but you gain access to a dream team of accountants, bankers, and valuation experts ensuring a smooth transition and cohesive thinking among team members. Too often the allure of deal making entices buyers to act with a sense of urgency, however there is a difference between expediency and haste. A solid M&A team will ensure that your deal is expertly implemented with a proper M&A integration framework in place. Questions or comments? Contact Melissa Balocca, melissa@baloccalaw.com.

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