Common Issues in Merger and Acquisitions Transactions

When two businesses merge or one business acquires another, the acquisition process goes fairly smoothly most of the time. However, it is important to be aware of and prepare for a number of things that may occur during any type of merger or acquisition.

At Sunbelt Business Brokers, we have been in business since 1979, and in that time, we have established ourselves as one of the largest and most dependable brokerage networks in the world. If you are interested in buying, selling, or merging with any private business, we highly recommend that you consider the following things to ensure the transaction proceeds as effortlessly as possible.

Know the Deal Structure

Generally, three kinds of structures exist for these types of transactions: stock purchases, asset sales, and mergers. It is up to you to decide which type of structure benefits your business. However, you should thoroughly research the type of business you are buying, as you do not want to risk losing millions of dollars on buying or merging with a business that is not financially viable.

How You Want To Pay

Most merger and acquisitions transactions are paid for by cash or equity. Obviously, cash is the least risky method of payment, as it has a solid market value and can be obtained from capital/excess cash or untapped credit lines.

Equity, in comparison, is a little more complex, as it requires the payment of the acquiring company‘s equity, which can be risky but can also improve the acquirer’s debt rating and reduce the future cost of debt financings.

Target Indemnifications

These are some of the most highly negotiated and debated conditions of merger and acquisitions transactions. The most important issue you will need to worry about is what type of indemnification claims will be capped by the escrow amount. This is where many transactions fall apart because there is the potential for several breaches of contract, especially with regard to taxes and intellectual property.

Closing Conditions

Many businesses that go through the process of buying or selling companies tend to overlook one of the most important aspects of the transaction process: the closing terms and conditions. These can include anything from receiving approval from the board of directors to approving the transaction through reaching a certain voting threshold by shareholders.

It is incredibly important to determine whether the deal is actually approved, which is why it is necessary that you have an experienced team of merger and acquisitions professionals that will make certain that all of the contract terms are satisfactory to both parties.

There are many other important issues you should be aware of when buying, selling, or merging with a business, as it can be a complex process. Nevertheless, as long as you are aware of these topics and seek the help of a professional company that specializes in business mergers and acquisition transactions, you can expect things to go as you would like.