Choosing the right attorney for an M&A transaction is much like choosing the right doctor for a medical procedure. Just as you wouldn’t want a general practitioner performing your brain surgery, you don’t want a general practice lawyer handling your M&A deal. M&A attorneys provide valuable expertise to ensure you navigate the intricacies of a transaction effectively. Read on to discover why you should think twice before using anyone besides an M&A attorney for your transaction.
Extensive Negotiating Experience That Mitigates Legal Risk
A good M&A attorney should have a long track record in negotiating deals. Experienced M&A attorneys have learned from both their successful and their unsuccessful transactions, and they’ll use that knowledge to avoid problems and structure the best deal for you with the right buyer. For example, your attorney should know how to negotiate a successful transaction while protecting you in the event that a buyer seeks post-transaction remedies. Your attorney will also be able to leverage their experience with previous transactions to focus on the market terms and conditions that will be important to your deal.
Negotiating transaction terms is a critical piece of the M&A process. Experienced attorneys know what terms they need to focus on to structure the best deal for you. Inexperienced or non-M&A attorneys, on the other hand, might not push hard enough on critical terms and too hard on non-critical ones. If your attorney does not understand what a buyer will be willing to accept, they may waste time negotiating terms that aren’t realistic or important. This may prompt a buyer to walk away or result in a poorly structured deal. The right M&A attorney will negotiate terms that protect your interests within the confines of what you and a buyer are willing to accept.
Your M&A attorney should also help you protect the proceeds from your transaction by identifying potential legal risks and advising on strategies to mitigate these risks, often by working with an M&A advisor. Your M&A attorney and advisor will work together to explain the potential risks you face as a seller in a transaction. The M&A attorney will translate your position into precise, effective legal language in the purchase agreement. This language is important and requires specialized knowledge; a non-M&A attorney, on the other hand, might misrepresent your positions in the transaction documents, resulting in significant financial liabilities and years of lawsuits down the road that could have easily been avoided. Even if you escape that worst-case scenario, you are likely to have a poorly structured document.
Substantial Transaction Expertise That Optimizes the Deal Terms in Your Favor
M&A attorneys understand the legal, financial, and regulatory aspects of the M&A process – including the ways different state laws will affect the transaction. This expertise enables them to provide more effective and targeted advice while saving you time. Many M&A transactions use Delaware law as the governing law since Delaware courts are business friendly. Your attorney should understand transaction law in Delaware since it is the typical venue for most agreements. While your general attorney may have a clear grasp of your state’s laws, they may not understand the transaction intricacies of other state laws.
For example, imagine your attorney is reviewing a buyer’s proposed changes to the purchase agreement and discovers that the buyer has changed the governing law from Delaware to California. An inexperienced attorney might use California law, for example, if that is where the seller is based – not realizing the problems this might create. A good M&A attorney will understand that this change will impact numerous aspects of the potential deal, possibly creating issues should a dispute arise after the transaction closes. An experienced M&A attorney will help you avoid such problems.
Speed and Efficiency That Reduces Costs and Leads to Quick Closings
M&A attorneys may charge higher fees per hour than your typical corporate attorney. However, the additional hours a non-M&A attorney will likely spend to get up to speed about a transaction can negate any savings, as can the legal issues that may arise from a poorly negotiated purchase agreement. Using the state laws example above, let’s assume your non-M&A attorney managed to provide effective counsel about the differences between California and Delaware transaction laws. However, how many billable hours did it take for them to become educated on topics your M&A attorney just knows from experience? M&A attorneys have seen hundreds of transaction documents and know where to look for issues. You don’t want your lawyer playing catch-up while you’re trying to close a deal. M&A lawyers are experienced in navigating the M&A process and will help transactions close quickly and efficiently.
An Extensive Team and Network That Limits Your Liability and Saves Time
The transaction process is intricate and time-consuming. The right M&A attorney will provide you with multiple people to assist in your transaction. This deep and broad knowledge base protects you. On the other hand, if you use an independent attorney for an M&A deal, you could open yourself up to a high level of risk. Consider choosing a firm whose team will include at least a few senior and junior lawyers to assist. That way, if an issue arises with one lawyer, you have the certainty that you’ll still receive effective counsel because of that strong team. Most midsize to large firms also have specialized teams to provide counsel on the environmental, tax, or employment aspects of your transaction.
Choosing the right lawyer to assist in an M&A transaction is critical for success. The right one will limit your legal and financial exposure while saving you substantial time. You’ll want to select an experienced and competent team to help you navigate the process.
Please get in touch with us if you have comments or questions about this article or would like more information on this subject matter.