The Legal Team’s Role in M&A
The legal team needs to be involved from the beginning of the M&A process. Some strategies have inherent legal risks, and it is the legal team's job to understand the regulatory, legal, and jurisdictional issues and obstacles that may be present in the transaction. The worst thing that could happen is you spend a lot of money and time looking at a transaction that you shouldn't even be looking at in the first place.
"If you don't understand the why you can't effectively develop the how." - Andrew Gratz.
Key milestones that the Legal Team is responsible for
- Non-Disclosure Agreements - Whether you are a buyer or seller, it is in your best interest to have an NDA. There are also a lot of things that go into an NDA. Your legal team needs to provide or detect the correct language to protect you from litigation or any other unwanted obligation that you might get yourself into.
- Letter of Intent - Whether it's binding or non-binding, this is your very first chance to make a pitch as to why the seller should choose you as the buyer. Drafting your LOI thoughtfully and methodically will help you secure the transaction.
- Diligence - It is the legal team's duty to confirm if the seller has the proper ownership of the asset that you are buying. Do they have the correct licenses, intellectual property, and the proper documentation needed for that asset to be sold.
- Purchase Sale Agreement - The legal team is the one that finalizes the sale. The Purchase Sale Agreement should include what you are buying and what you are not buying.
- Deal Fever - Executing a bad deal can be devastating for the company. Deal fever tends to lead certain companies to assume risk disproportionate to the reward. The legal team can help mitigate deal fever by detecting liabilities that you might unintentionally assume.