Editor’s notice: First in a three-part collection.
Though the offers market has proven a modest rebound in early 2025, a latest report by Deloitte notes that at this time’s dealmakers should “navigate perpetual uncertainty.”
This uncertainty is pushed by quite a few components: financial adjustments, evolving threat administration, and rising applied sciences, for instance.
Consequently, Deloitte says, “pivoting has emerged as a core competency” for dealmakers.
The identical goes for legislation departments concerned with a company transaction — and even the opportunity of a future transaction.
“‘Logistics’ is a vital phrase right here, as a result of the entire M&A course of can be a technique of logistics,” says Kariem Abdellatif, the pinnacle of Mercator by Citco (Mercator), a specialist entity administration supplier that helps organizations handle their international entity portfolios, together with throughout advanced M&A transactions.
Having the proper companion in place to supervise a transaction’s quite a few and complicated particulars will permit the legal professionals to deal with high-level work like pricing and negotiation, he notes. This, in flip, permits the flexibleness that at this time’s dealmakers should domesticate.
On this collection introduced by our associates at Mercator, we’ll be offering a step-by-step information for basic counsel navigating a merger or different company transaction. To begin, we’re exploring finest practices for company legislation departments within the pre-merger section.
Keep tuned for our upcoming articles detailing how GCs may help negotiate and shut a deal, in addition to how the legislation division may help combine organizations post-merger.
We’ll even be discussing these subjects in a webinar. You possibly can pre-register right here.
Get Good Information (and Know What to Do With It)
A primary step for any authorized division concerned in a company transaction is to know the portfolio of firms concerned. The one method to do that is by gathering reliable information.
“In the case of information, there are a number of essential questions that want answering,” Abdellatif says. “What info do we want? The place is it saved? Who maintains it? How can we confirm its accuracy? Is it updated? Getting clear solutions to those questions early on is crucial for making knowledgeable choices and planning efficient integration.”
A platform like Mercator’s Entica can take this a step additional by making use of that information to create detailed and interactive company org charts. The platform can even generate hypothetical charts to mannequin potential acquisitions.
These charts map out the “household tree” of a company — exhibiting which entity sits on high, what occurs if entities’ places are moved, what it will imply if an entity had been liquidated.
“Our expertise permits authorized groups to visualise the complete org chart,” Abdellatif says. “From there they will toy round with it to see how adjustments may have an effect on the general company construction. That is significantly helpful throughout M&A discussions, the place understanding advanced entity relationship is essential.”
Decide Your Lane
Whereas gathering company information is essential, data of a possible deal should usually be stored confidential exterior of some key stakeholders.
When the GC is introduced below the umbrella, their first step is to find out their position.
Will the GC be participating exterior counsel? Will they be managing these legal professionals? Will the GC be the first level of contact for the transaction?
The scope of those potential roles varies extensively, notes Josh Hollingsworth, an M&A companion with Barnes & Thornburg LLP.
The GC of an organization being acquired, for instance, is perhaps restricted to helping the customer in conducting due diligence. In different circumstances, the GC is perhaps anticipated to guide the complete deal.
“Navigating the place they slot in and asking affirmative questions in order that there aren’t any assumptions — it’s essential for a GC to simply work out what their position is in some instances,” Hollingsworth says.
Grasp Organizational Psychology
When a GC is concerned in advancing a transaction, they need to draw on their delicate abilities as a lot as their authorized coaching within the pre-merger section.
Pondering strategically in regards to the group and the stakeholders concerned is a key to success.
“I don’t suppose there’s a selected playbook for every circumstance,” Hollingsworth says. “I believe it’s only a matter of being conscious of everybody who’s concerned and ensuring that you just perceive the universe of how this transaction’s going to have an effect on all people.”
An preliminary step is to find out who can be introduced into the deal, and who is not going to be told.
This requires considering via who within the group can be essential — the IT, HR, and threat administration groups, for instance.
“If no one in HR is aware of, it’s going to be exhausting to get via worker and advantages diligence,” Hollingsworth says. “If no one in IT is aware of a couple of transaction, and an IT concern comes up, equally, that can be difficult.”
Abdellatif notes that expertise like Mercator’s Entica system can play a job in making certain the data of the deal sits solely with the stakeholders who’re looped in.
“What we need to make sure is that information entry is out there to those that want it, however not past that,” Abdellatif says. “That information is just accessible to those that really require it, and also you don’t have folks rummaging via info they shouldn’t.”
Perceive Your Crew
It’s additionally essential to gauge the possible motivations of every stakeholder with a job within the transaction.
Hollingsworth notes that anybody knowledgeable of a possible deal will first ask themself a easy query.
“Actually, ‘What does this imply for me?’ goes to be the primary query that everyone who’s introduced below the tent goes to consider, and that’s simply human nature,” Hollingsworth says. “So simply being ready to work via these dynamics is essential for a GC.”
If an organization is being acquired, for instance, that could possibly be seen as a risk to many stakeholders, who may match to undermine the deal.
It’s true of acquiror firms as properly, Hollingsworth notes. Some may even see somebody within the acquired group as a risk to their place. Some could merely suppose it’s an excessive amount of work to undergo with the deal.
Will a stakeholder be gaining or shedding in job title and standing? Are there monetary incentives, like parachute funds to a departing CEO, concerned?
“I believe lots of people take it with no consideration that if the CEO or the board says, ‘We’re gonna do one thing,’ that we’re gonna do it,” Hollingsworth says. “What finally ends up taking place in any group dynamic is there are numerous ranges of resistance.”
For an organization doubtlessly being acquired, sustaining impeccable information and compliance may help thwart resistance to a deal. These practices may even present bargaining leverage, based on Abdellatif.
“Having this stage of group builds confidence with potential acquirers and might positively affect their strategy to the transaction” he says.
If an organization doesn’t appear to have well-maintained regulatory compliance, in contrast, an buying firm will possible turn into extra essential.
Know-how can even assist. Mercator’s Entica, for instance, includes a company compliance calendar that tracks all necessities a yr prematurely and ensures an organization maintains correct constructions round compliance.
Abdellatif has seen acquired firms impressing acquirors with the thoroughness of their regulatory compliance, and the buying firms in flip searching for to undertake their programs.
This thoroughness can even assist stave off any inside resistance to a deal.
“The perfect protection is ensuring that you’ve your geese in a row, that your info and information is correctly arrange, and that you could reveal simply how successfully you run your division,” he says.
Don’t Neglect About Your JD
Along with organizational administration, in fact, a GC should additionally think about authorized dangers at this stage.
One high threat in a pre-merger surroundings is confidentiality. For publicly traded firms, insider buying and selling legal guidelines will kick in, and for nonpublicly traded firms, there will be points with staff or distributors realizing of the deal on the early phases.
A GC should guarantee there are strong nondisclosure agreements — and severe consideration round which inside and exterior stakeholders are knowledgeable to start with.
“Confidentiality can be on the very high of your authorized threat within the pre-transaction section,” Hollingsworth says. “Equally, antitrust issues go hand-in-hand.”
Company transactions will typically happen between competing firms, which should make a pre-merger submitting with the Federal Commerce Fee below the Hart-Scott-Rodino Act. If there are international operations, a wide range of different laws apply as properly.
Competing firms which might be exploring a merger should additionally watch out in regards to the stage of cooperation throughout this stage due to antitrust considerations often known as “gun-jumping.”
“The expectation is that you just’re going to function the enterprise independently all the way in which up via closing,” Hollingsworth says.
Leverage Your Tech
As with all issues within the company world, AI-enabled expertise is enjoying an growing position in mergers and acquisitions.
Within the pre-merger section, generative AI will come into play for in-house legal professionals — significantly when drafting pre-merger paperwork like nondisclosure agreements.
New expertise can even instantly inform counsel of “what’s market,” giving negotiators detailed data of precedent relating to each facet of a transaction.
The Entica platform combines workflows with information administration, making certain actions as various as submitting monetary statements, appointing administrators and auditors, and executing paperwork are all tracked and accounted for.
It permits fast entry to this information all through an organization’s full portfolio, and segments it to make sure it’s solely accessible to stakeholders who require it.
“Once you come again to logistics, it actually serves because the spine in some ways,” Abdellatif says.
Seasoned practitioners like Hollingsworth keep in mind the due diligence technique of many years in the past, the place there was a bodily information room that contained banker containers stuffed with paperwork associated to the transaction.
These, in fact, have been changed by on-line information rooms that may be accessed 24/7. Equally to due diligence, closings and negotiations have moved from in-person to digital.
For negotiators, although, this comfort could create a brand new pitfall to keep away from.
In case you’ve flown throughout the nation for an in-person assembly, the expectation is that objects can be resolved in that assembly, Hollingsworth notes.
“Permitting digital negotiations results in extra iterations of the doc,” he says, “and it could really result in the negotiations taking longer.”
Keep tuned for the following article on this collection, the place we’ll be exploring steps to contemplate through the negotiation and shutting of a transaction. You possibly can register for our webinar on these subjects right here.
