M&A deals require navigating a complex mix of legal intricacies. This guide explains the key legal aspects to consider as part of these business deals.
M&A transactions often take the big-picture view of how a successful merger or acquisition can boost your business prospects. However, M&A deals require navigating a complex mix of legal intricacies. Without getting all the paperwork signed, sealed and delivered, your deal could fall at the final hurdle.
In 2024, the UK led Europe’s M&A recovery, indicating the tremendous value inherent within the UK market in terms of inbound and outward M&A transactions. If you’re ready to take advantage of it, this guide explains the key legal aspects to consider as part of these business deals.
Do you need a solicitor for an M&A?
No legal requirement exists for businesses to hire a solicitor to conduct a merger or acquisition. Just because there’s no legal requirement doesn’t mean you should try to scrimp by not hiring one.
Plenty of small businesses operate without solicitors, but even middle-market transactions involve dozens of staff and advisors to manage the due diligence process, achieve negotiating parity, and ensure that all official agreements stand up to scrutiny.
All parties should hire a solicitor at the earliest stage of the M&A process. Brief them on the transaction and ensure they’re aware of the terms of your deal and what’s required of them. Calm legal heads provide valuable advice and ensure that the terms of the final agreement are exactly what each side expects.
Will an M&A consultant help with the legal side of mergers and acquisitions?
The UK’s booming M&A market has resulted in all manner of deals in. According to IFA Magazine, UK M&A value rose by two-thirds year-on-year in the first half of 2024. Many of these deals would have involved M&A consultants leading due diligence and providing targeted support throughout.
However, it’s vital to understand that an M&A consultant is not necessarily a qualified solicitor. They can provide advice and guidance based on their experience, but they cannot take charge of the legal side.
What they can do is point you in the right direction to a solicitor with specific experience in the sector. Many businesses maintain legal counsel, but company directors can benefit from solicitors with specific experience in the M&A arena.
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Legal aspects of M&A transactions
M&A transactions are legally binding transactions. A slew of legal documents are part of any transaction, regardless of deal size. The role of your solicitor is to manage each document and ensure that your deal is fully compliant with UK law to prevent problems later.
For example, here are just some of the legal documents that feature within most M&A transactions:
Your solicitor will handle each relevant document to ensure it serves your interests and your deal goes smoothly. However, solicitors fulfil an array of functions within the context of these deals.
Here are the key legal aspects of M&As to be aware of:
Due diligence
The due diligence process is arguably the most essential part of any deal. The process involves the buyer providing an in-depth investigation of the target company, focusing on everything from financial and operational to strategic and legal matters. At its heart, due diligence confirms the assumptions made during the early parts of the deal, such as uncovering potential risks.
Although an M&A consultant may lead the process, your solicitor will dig through the company’s official documentation to negotiate the binding terms of the transaction. Likewise, they’ll ensure compliance with relevant laws and industry regulations.
Regulatory compliance
The UK’s competition watchdog is one such body that has the right to block potential mergers and acquisitions if they believe it will adversely impact the market. Under the auspices of the Competition and Markets Authority (CMA), your lawyer ensures your deal is ready for a full review.
Additionally, your legal team represents you in front of any number of authorities, including:
Depending on your industry and deal size, you may have to deal with one or more of these bodies to get your deal across the line. It’s an aspect that your solicitor will play a pivotal role in managing.
Legal documentation
Legal documentation isn’t a box-ticking exercise but about safeguarding your interests. The legal principle of caveat emptor, or let the buyer beware, applies equally in M&A transactions as in anything else.
Miss an important point in the final agreement that makes your deal significantly less attractive and you cannot turn back the clock. Solicitors are there to ensure this doesn’t happen to you. Further examples of legal documentation your solicitor will be intricately involved in include:
They’ll also manage all representations, warranties, indemnities and conditions within any purchase agreement. These can be immensely complicated and challenging for the average person to understand.
Post-transaction
Once your deal is across the line, the work of reorganisation and integration begins. However, post-transaction considerations are not merely internal issues but also come with significant legal implications.
For example, you may need to transfer employees, renegotiate existing contractors, or reorganise the entire corporate structure. Proper integration planning is vital to your success, and your solicitor will be one of the pillars of executing this plan.
At Hilton Smythe, we understand the value of an excellent solicitor with previous M&A experience. Our consultants can leverage an extensive industry network to connect you with legal professionals who will manage the legal side and give you peace of mind that every box has been ticked. To learn more, contact us today.