Question

Should I hire a Colorado lawyer when buying or selling a company?

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Julie A. Herzog - Mergers & Acquisitions - Super Lawyers

Answered by: Julie A. Herzog

Located in Denver, COFortis Law Partners LLC

Denver, CO
Phone: 303-295-9707
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Hiring a lawyer is imperative during a merger or acquisition for various reasons. First, a qualified business law attorney can pinpoint legal and structural issues with mergers and acquisitions during the transaction. Throughout the transaction, they can conduct due diligence to ensure your rights are protected and mistakes are not made. In cases of disputes, a lawyer can also represent you in litigation and negotiations. Whether you are buying or selling, knowing how to find an experienced attorney is vital before signing a retainer agreement.

A Lawyer Can Identify Structural and Legal Issues

There are various types of legal issues that must be addressed when buying or selling a company. One of the areas of greatest financial impact is tax structuring. A lawyer can help you to identify the tax consequences of certain ways of structuring transactions and help you to structure in a manner that has the best result for you, often resulting in significant savings. In addition, they can evaluate potential problems relating to employment, real estate and customer contracts. They can also assist with getting the necessary approvals for the transaction from customers, vendors and regulatory authorities.

Pinpointing possible structural issues prior to finalizing a transaction and typical transaction terms given the current mergers and acquisition landscape is crucial and can be easily overlooked by someone who does not have mergers and acquisitions expertise. An attorney can also draft pertinent agreements with all stakeholders and clarify the terms of your agreement in a letter of intent. A lawyer will structure the transaction properly and define milestones to avoid litigation, particularly those involving representations and warranties.

An Attorney Can Represent You in Negotiations and Litigation

During a transaction, the target company makes certain representations and warranties about their business and indemnification obligations. One reason litigation arises when buying or selling companies is when warranties or representations have inaccuracies. No matter the type of dispute, however, it is important to have an attorney who is familiar with the overall mergers and acquisitions market, time limitations, typical caps and floors limiting liability, consent requirements, purchase price adjustments, working capital requirements and earn-out protections. The more you understand the fine details of your transaction, the greater advantage you will have in negotiations and successfully closing the transaction.

Attorneys Can Conduct Due Diligence Prior To an Acquisition or Merger

To conduct due diligence on the target company, a lawyer must analyze every component from a legal and financial standpoint. This includes reviewing customer contracts, new hire and employee agreements, tax records, employee benefit plans, intellectual properties and real estate. An attorney will ensure that there is enough time for due diligence to occur before finalizing the transaction through a letter of intent. Conducting due diligence prior to finalizing a transaction encompasses all aspects of the target company. While many people focus on the financial aspects, the legal aspects are just as, if not more, important. This is because the legal aspects greatly impact the economic and financial consequences. 

Finding an Experienced Mergers and Acquisitions Lawyer Is Key

The lawyer you select should have many years of experience representing buyers and sellers in mergers and acquisitions. This experience allows them to provide a unique perspective about each party’s position. It can also be a good idea to look for a lawyer who has owned their own business and has personal experience with running a company. 

It is important to note that not all lawyers are equipped to handle the complexities involved in these types of transactions. Unfortunately, law schools do not always teach students how to do transactional work. Therefore, it is of the utmost importance that you select a lawyer who has had ample training by sophisticated professionals. Without proper training, they may not recognize issues or understand how transactions are structured or which terms are market. 

Without due diligence and adequate representation, you may be forced to spend thousands of dollars later to fix mistakes. The best way to ensure that a merger or acquisition is done properly the first time is by hiring expert mergers and acquisitions legal counsel from the start.

Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.

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