Editor’s observe: First in a three-part sequence.
Though the offers market has proven a modest rebound in early 2025, a latest report by Deloitte notes that immediately’s dealmakers should “navigate perpetual uncertainty.”
This uncertainty is pushed by quite a few elements: financial adjustments, evolving danger 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 potential of a future transaction.
“‘Logistics’ is a crucial phrase right here, as a result of the entire M&A course of can also 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 world entity portfolios, together with throughout complicated M&A transactions.
Having the proper accomplice in place to supervise a transaction’s quite a few and complex particulars will enable the attorneys to give attention to high-level work like pricing and negotiation, he notes. This, in flip, allows the pliability that immediately’s dealmakers should domesticate.
On this sequence offered by our buddies at Mercator, we’ll be offering a step-by-step information for normal counsel navigating a merger or different company transaction. To start out, we’re exploring greatest practices for company legislation departments within the pre-merger section.
Keep tuned for our upcoming articles detailing how GCs might help negotiate and shut a deal, in addition to how the legislation division might help combine organizations post-merger.
We’ll even be discussing these matters in a webinar. You can pre-register 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 corporations concerned. The one approach to do that is by gathering reliable information.
“On the subject of information, there are a number of important 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 important for making knowledgeable selections 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 may generate hypothetical charts to mannequin potential acquisitions.
These charts map out the “household tree” of a company — displaying which entity sits on high, what occurs if entities’ places are moved, what it will imply if an entity had been liquidated.
“Our know-how allows authorized groups to visualise your entire org chart,” Abdellatif says. “From there they’ll toy round with it to see how adjustments would possibly have an effect on the general company construction. That is significantly useful throughout M&A discussions, the place understanding complicated entity relationship is vital.”
Decide Your Lane
Whereas gathering company information is important, data of a possible deal should usually be saved confidential outdoors of some key stakeholders.
When the GC is introduced beneath the umbrella, their first step is to find out their position.
Will the GC be participating outdoors counsel? Will they be managing these attorneys? Will the GC be the first level of contact for the transaction?
The scope of those potential roles varies broadly, notes Josh Hollingsworth, an M&A accomplice with Barnes & Thornburg LLP.
The GC of an organization being acquired, for instance, is likely to be restricted to helping the client in conducting due diligence. In different circumstances, the GC is likely to be anticipated to steer your entire deal.
“Navigating the place they slot in and asking affirmative questions in order that there aren’t any assumptions — it’s necessary 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 gentle abilities as a lot as their authorized coaching within the pre-merger section.
Considering strategically concerning the group and the stakeholders concerned is a key to success.
“I don’t assume there’s a particular playbook for every circumstance,” Hollingsworth says. “I feel 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 everyone.”
An preliminary step is to find out who might be introduced into the deal, and who won’t learn.
This requires considering by way of who within the group might be necessary — the IT, HR, and danger administration groups, for instance.
“If no person in HR is aware of, it’s going to be arduous to get by way of worker and advantages diligence,” Hollingsworth says. “If no person in IT is aware of a couple of transaction, and an IT problem comes up, equally, that might be difficult.”
Abdellatif notes that know-how like Mercator’s Entica system can play a task in guaranteeing 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 offered to those that want it, however not past that,” Abdellatif says. “That information is barely accessible to those that truly require it, and also you don’t have individuals rummaging by way of info they shouldn’t.”
Perceive Your Crew
It’s additionally necessary to gauge the probably motivations of every stakeholder with a task 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 beneath the tent goes to consider, and that’s simply human nature,” Hollingsworth says. “So simply being ready to work by way of these dynamics is necessary for a GC.”
If an organization is being acquired, for instance, that could possibly be seen as a risk to many stakeholders, who may go to undermine the deal.
It’s true of acquiror corporations as effectively, Hollingsworth notes. Some may even see somebody within the acquired group as a risk to their place. Some could merely assume 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 feel lots of people take it without any 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 occurring in any group dynamic is there are numerous ranges of resistance.”
For a corporation doubtlessly being acquired, sustaining impeccable information and compliance might help thwart resistance to a deal. These practices may even present bargaining leverage, in accordance with Abdellatif.
“Having this degree of group builds confidence with potential acquirers and might positively affect their method to the transaction” he says.
If an organization doesn’t appear to have well-maintained regulatory compliance, against this, an buying firm will probably turn into extra important.
Know-how may assist. Mercator’s Entica, for instance, encompasses a company compliance calendar that tracks all necessities a yr upfront and ensures an organization maintains correct constructions round compliance.
Abdellatif has seen acquired corporations impressing acquirors with the thoroughness of their regulatory compliance, and the buying corporations in flip searching for to undertake their programs.
This thoroughness may assist stave off any inner resistance to a deal.
“One of the best protection is ensuring that you’ve your geese in a row, that your info and information is correctly arrange, and you can display simply how successfully you run your division,” he says.
Don’t Overlook About Your JD
Along with organizational administration, after all, a GC should additionally think about authorized dangers at this stage.
One high danger in a pre-merger setting is confidentiality. For publicly traded corporations, insider buying and selling legal guidelines will kick in, and for nonpublicly traded corporations, 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 critical consideration round which inner and exterior stakeholders are knowledgeable to start with.
“Confidentiality might be on the very high of your authorized danger within the pre-transaction section,” Hollingsworth says. “Equally, antitrust issues go hand-in-hand.”
Company transactions will typically happen between competing corporations, which should make a pre-merger submitting with the Federal Commerce Fee beneath the Hart-Scott-Rodino Act. If there are international operations, quite a lot of different rules apply as effectively.
Competing corporations which can be exploring a merger should additionally watch out concerning the degree of cooperation throughout this stage due to antitrust considerations generally known as “gun-jumping.”
“The expectation is that you just’re going to function the enterprise independently all the best way up by way of closing,” Hollingsworth says.
Leverage Your Tech
As with all issues within the company world, AI-enabled know-how is enjoying an growing position in mergers and acquisitions.
Within the pre-merger section, generative AI will come into play for in-house attorneys — significantly when drafting pre-merger paperwork like nondisclosure agreements.
New know-how may instantly inform counsel of “what’s market,” giving negotiators detailed data of precedent concerning each side of a transaction.
The Entica platform combines workflows with information administration, guaranteeing actions as assorted 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.
“Whenever you come again to logistics, it actually serves because the spine in some ways,” Abdellatif says.
Seasoned practitioners like Hollingsworth bear 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, after all, 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.
For those who’ve flown throughout the nation for an in-person assembly, the expectation is that objects might be resolved in that assembly, Hollingsworth notes.
“Permitting digital negotiations results in extra iterations of the doc,” he says, “and it might truly result in the negotiations taking longer.”
Keep tuned for the following article on this sequence, the place we’ll be exploring steps to think about throughout the negotiation and shutting of a transaction. You can register for our webinar on these topics here.
