Legal considerations before merging with another company

As businesses grow and expand into bigger markets, there may come a time when it is financially beneficial to either merge with, or acquire, another company. However, before embarking on a merger or acquisition it is advisable to approach expert commercial lawyers.

Moreover, guidance on how best to prepare contracts and negotiate the terms of sale early on in the process can help to facilitate the best results. This consultation process with a commercial lawyer allows CEOs to better assess the value of a business they are interested in acquiring.

Statistics show an increase in domestic M&As 

Last year, domestic mergers and acquisitions (M&A) throughout Australia increased by 7 per cent, according to research by Intralinks Holdings. In particular, sectors such as consumer products and services, healthcare, media and entertainment, and high technology excelled.

KPMG and the Australian Financial Review collaborated on a special report titled ‘Mergers & Acquisitions Outlook’ released on July 2014. Their views mirrored the Intralinks Holdings statistics, with authors raving about the M&A boom in Australia.

“The M&A market has been very strong, volatility is low, valuations are high, debt is available to most people, and global yields are very low, so the desire for growth is stronger”, said Geoff Joyce, the executive director of Macquarie Group in the report.

Early legal consultation can help 

Recognising the importance of legal advice when embarking on a M&A is beneficial because failure to identify the specific representations and warranties of the target company’s privacy issues can lead to problems down the road.

It is important to work in tandem with a commercial lawyer so that you are well informed of all the implications involved in buying or merging with another business, particularly if that business collects personal information from consumers. 

With the boost of domestic M&As, the trend may continue to grow. If your business is considering a merger in the near future as part of the current boom, prioritise seeking legal advice early.