Negotiating A Merger

 

Companies often find themselves in a position where merging with another business makes good commercial sense. There are a number of common reasons behind a merger and these can include creating value by combining the two companies, diversification into new markets, services or product lines,  acquiring assets, becoming more tax-efficient and increasing financial capacity. Choosing the right company to merge with needs to be done very carefully. Bearing in mind approximately half of all business mergers end in failure, thorough due diligence and investigations should be conducted prior to merging. One of the major causes of failure is that the ethos of the two company’s is not aligned. In this article, Negotiating a Merger, we look at the fundamental steps that need to be taken.

Free Initial Telephone Discussion

For a free initial discussion on how we can help you negotiate a merger, get in touch with us today. We will review your situation and discuss the process involved in a clear and approachable manner. Early expert legal assistance can help you avoid making mistakes, saving you money and also avoiding the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.

What Are the Steps Involved?

  1. Ensure you clearly set out the limits to which a deal is possible

The initial meeting between the two companies will broadly set out the direction that discussions will follow. As you are the firm doing the acquiring, it will be in your interests to make the first offer. Remember that if the merger does go ahead, you will be responsible for the success of the new entity. When establishing an opening bid, leave yourself room to negotiate and this figure should be around 75 – 90 % of the company’s real value.

  1. Draw up a detailed agreement that covers all the bases to ensure integration of the two companies is as painless as possible.

Once the initial offer is made, more detailed and complex negotiations will begin. Although the final agreed figure is of great importance, drilling down into what lies behind these numbers is crucial. Financial negotiations also allow the buying firm to probe issues that might affect the success of the merger, such as unexplained variations in the other company’s revenues. As you discover more and more about the selling company, check and double-check the information provided. The more critical the information, the more thorough should your investigations be.

  1. Ensure you don’t lose or demotivate the key staff in the company you are trying to acquire.

The key here is to remember that the people you are actually negotiating with, may well be part of the reason you are trying to buy the company in the first place. As such, enter negotiations with tact and diplomacy. This is especially the case where you are looking to buy a smaller company. The existing culture of the business needs to be handled graciously and with respect. For example, peoples’ job titles are often very important to them as staff often define themselves by their title. Further, consider what the name of the new entity is going to be and where the new business will operate from. If you relocate the business to the other side of the country, you will lose some key staff without question.

  1. Sign the contract and make sure the implementation runs as smoothly as possible.

When you are at the stage of signing the contract, remember that negotiations can still be ongoing. It’s often the negotiation of the specific terms that can cause the biggest problems. To minimise this, try and document all decisions and commitments made during the early negotiating stages. When a verbal agreement is reached, review the main points and obtain an agreement from both parties
not to create additional issues. It’s also a good idea, well before signing, to get key individuals from both firms together to begin planning merger integration.

What Other Things Do You Need To Consider?

When actually involved in the discussions leading to an agreement, there a number of key points to consider:

  • Keep calm, respectful and unemotive.
  • Try and build bridges between the two companies. Don’t criticize the other company.
  • Keep the employees of both companies engaged and happy.
  • Don’t get bogged down with the finer details. Be flexible and remember the bigger picture.

How we can help

We have a proven track record of dealing with business mergers. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Corporate Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of reducing risk, saving you money and ensuring you achieve a positive outcome.

To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

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