Do not wait too long for advice. While meeting with a group of experienced consultants recently, we discussed mergers, what had worked, and what had not. We talked about clients from the nonlegal side, who wait too long to get advice on their mergers. They start doing things, preparing paperwork, discussing terms, and only later involve a team and lawyers. This is usually a big mistake.
Many business owners will say, “I don’t want to get lawyers involved, or I don’t want to get consultants involved because they will muck up the works; they will slow things down, and the deal will never get done.”
On the flipside, having trusted advice, having people you turn to, and building a team, can help you make sure that you make the right decisions and that you are not giving up terms. Waiting too long to involve consultants, or particularly lawyers, might mean that you are giving up deal concessions.
You might negotiate and set up a structure that is wrong for you and more beneficial to the other side. Then, by the time you discover this, you may have lost the ability to negotiate that point.
In an extreme case years ago, one of my legal colleagues worked on a case where a company accidentally transferred too many rights for its software to a purchaser, prior to a merger transaction. During due diligence, the buyer found that those rights had been transferred, and the person who had bought the rights had the ability to compete against the buyer. It shut the entire merger down.
This could have been avoided. Certainly, if the deal team had gotten involved, even after the over-assignment of rights, the contract might have been renegotiated. Don’t take risks by waiting. Get a good team of advisors involved in the process early. Do not think that anything is mundane or routine. It is never too early in the process to start involving the right professional advice to avoid a costly error.
Your business is running your day-to-day business. Unless you are familiar with merger transactions, make sure that you have somebody with you who knows the pitfalls and can protect you throughout the transaction.
What has been your experience? Do you know anyone who has made a major mistake in a merger transaction? Perhaps accidentally? What can you do differently in the future? Join us in the comments below.
This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity. Freeimages.com/Photographer Candice Courtney.
About the Author
Shawn McBride — R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Firm, PLLC. Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can email R. Shawn McBride or call (214) 418-0258.
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