In the world of business, mergers and acquisitions (M&A) are not just transactions but strategic decisions that can redefine the future of the companies involved. Welcome to our series devoted to the importance of process through the complexities and nuances of M&A.
While the economic terms and transaction structure are crucial, the process followed to get to the closing is often misunderstood or overlooked. This series aims to offer a deeper understanding of the M&A process in middle-market and small-market deals and its impact on both buyers and sellers. A well-planned and executed M&A process contributes to a smooth and efficient transaction, maximizes value for sellers, and ensures a seamless transition and future growth. Conversely, a poorly executed process can lead to misaligned expectations, value deterioration, and operational inefficiencies.
Join us as we explore each stage of the M&A process, from assembling a deal team to post-closing deliverables. Stay tuned as we roll out the rest of our series in the coming months ahead.
- Part 1 – The Importance of Process: Crafting Success in M&A Transactions
- Part 2 – The Art of NDAs, Initial Discussions, and LOIs
- Part 3 – The Power of Letters of Intent and Term Sheets in M&A
- Part 4 – Bringing it Home: Negotiating the Deal Documents
- Part 5 – The Last Lap: Strategies for a Smooth M&A Closing Process
- Part 6 – After the Ink Dries: Understanding Post-Closing Deliverables
Part 6: Post-Closing: Deliverables, Milestones and Counsel’s Role
We’ve reached the final post in our series on the M&A process for small and middle-market transactions. In this series, we’ve discussed how the parties prepare for a transaction, the importance of letters of intent, due diligence process and the disclosure schedule, the purchase agreement and key transaction documents, and the closing process.
The completion of an M&A deal does not mean the end of responsibilities for the parties involved. The post-closing phase involves several tasks, from delivering the final transaction documents to meeting agreed-upon milestones. This final blog post in our series will discuss these post-closing obligations and the role of legal counsel in ensuring a smooth transition.
After the deal is closed, both parties must deliver on their post-closing commitments. Aside from legal matters, these tasks might also involve operational tasks such as integrating IT systems, merging teams, and communicating the changes to stakeholders.
Immediately after the closing, the attorneys on each side typically prepare a closing binder for their client. This is usually a large pdf file that includes executed versions of every transaction document for future reference. In addition, there may be regulatory filings that must be made shortly after the closing.
Post-closing requirements related to the purchase agreement usually include a working capital true-up that is delivered by the buyer to the seller, and if an earnout is involved, documentation related to those contingent payments.
Unfortunately, some transactions will include one or more post-closing claims for indemnification by the buyer. In many instances these claims are based on a breach of a representation or warranty by the sellers in the purchase agreement that has lead to liabilities that the buyer is required to satisfy. These claims can be costly depending on the subject matter, and may take an extended period of time to resolve. If the sellers dispute the validity of the claim, litigation counsel may be necessary.
Good M&A attorneys check in with their client after the deal has closed. This is usually done prior to a post-closing milestone such as the delivery date for the working capital true-up, the date that earnout payments may be deemed earned, or prior to the expiration of the survival period for representations and warranties.
We hope this series has been a helpful introduction to the process of buying or selling a business, and that it sheds some light on what can be an intimidating process for the uninitiated. Legal counsel that is highly experienced with M&A transactions provides a tremendous amount of value, including mitigating risk and contributing to an efficient process that helps ensure the transaction closes quickly.
Our team has worked on many deals in the small and middle markets, and we have the experience needed to help you accomplish your goals with an acquisition or a sale of your business. Whether you’re a buyer or a seller, we’d love to work with you on your next deal. Contact us at info@doidacrow.com or call us at 720-306-1001.
About The Author: Vaughn Marshall
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