Mergers and acquisitions offer great growth potential, but with great opportunity comes great risk. Are you prepared to navigate the legal challenges?
A merger or acquisition (M&A) is a business transaction that involves the transfer of ownership of a company to another company.
Mergers and acquisitions are complex with numerous potential issues that can affect the success of the deal.
Here are some of the main legal pitfalls to watch out for and how to successfully navigate them:
Legal Due Diligence
Due diligence is key to identifying and mitigating potential risks or liabilities. The process involves evaluating the target company’s financial, legal, and operational position. Always consult a lawyer to conduct legal due diligence.
Contractual Issues
Mergers and acquisitions will involve a vast number of contracts that need to be carefully drafted and reviewed. Ambiguous contracts can lead to misunderstandings and potential legal disputes. Legal professionals can help to ensure that all contracts are clear, and enforceable and protect both parties.
Regulatory Compliance
In Nigeria, there are regulatory bodies that oversee mergers and acquisitions. Non-compliance with these regulatory bodies could result in penalties or the deal being blocked outright. Seeking legal guidance is essential to ensure that you meet all regulatory requirements.
Closing Conditions
These are the conditions that must be met to finalise the deal. These conditions can be related to financial performance, regulatory approvals or legal compliances. If these conditions are not met before a deadline, either party may have the right to terminate or renegotiate the deal.
Intellectual Property (IP)
Intellectual property (IP) assets including trademarks and copyrights can influence the value of a company. It is important to properly value and protect the IP assets of both companies to avoid disputes after the deal. Legal professionals can help to identify and address IP issues.
Employment Law
Understanding labour laws is crucial to avoid employee-related conflicts. Mergers and acquisitions can lead to changes in employee benefits, job security and redundancies. Employment law solicitors can help you navigate this topic and mitigate any potential risks.
Negotiating Deal Terms
This is the most important part of the process as the terms will shape the futures of both companies involved. Key aspects include:
• Payment Structure
• Purchase Price
• Representations and Warranties
• Due Diligence
• Closing Conditions
It is important to have legal advisors available to ensure that the terms are fair and protect the interests of both parties.