Mergers & Acquisitions

Whether buying, selling, or partnering, we provide comprehensive legal support throughout the entire business transaction process. From structuring the deal and conducting due diligence to ensuring regulatory compliance and drafting essential documents, we guide small businesses every step of the way.

We understand the importance of maximizing resources and minimizing risks. Our goal is to help clients achieve the most favorable terms while navigating the complexities of business transactions.

Key Considerations For Structuring The Transaction

Structuring an acquisition transaction involves careful consideration of numerous factors. Key elements to consider include assumption of liability, transferability of licenses and intellectual property rights, the number of target shareholders, required approvals, tax consequences, financing, and third-party consents. Industry-specific regulations can further complicate the process. For instance, the transfer of liquor licenses or ownership of professional businesses may be subject to unique restrictions. To ensure a successful transaction, it is crucial to consult with experienced legal counsel to determine the optimal structure for your specific circumstances.

• Potential acquisition of liabilities: Thoroughly assess the target company’s liabilities to avoid unexpected financial burdens.
  
  • If the buyer is cautious about acquiring certain liabilities, it is advisable to structure the deal as an asset purchase transaction. This enables buyers to choose the exact assets they would like to acquire and avoid potential unknown or undisclosed liabilities created by past incompliance.
• Intellectual property and licenses: Identify and evaluate the necessary intellectual property and licenses for the business to operate smoothly.
  
  • If licenses or intellectual property rights are crucial to the buyer in running the business the buyer intends to acquire, then a stock purchase transaction may be more desirable. Stock acquisition means that the buyer acquires all liabilities and assets, including licenses. However, it is critical to check the transferability of the licenses. For instance, liquor licenses may not be transferable. Additionally, the buyer should be cautious about ownership requirements in some industries. For example, states may have requirements that architecture businesses must be owned by a certain percentage of licensed architects. Incorporated medical and medical spa offices often must be owned by licensed physicians, nurse practitioners, or other licensed professionals. In some states, changes in ownership for engineering companies must be reported to respective professional boards of professionals.
• Number of shareholders & stockholder approvals: Determine the number of owners in the company to be acquired.
  
  • If there are too many shareholders in the target company, bringing them all to an agreement to sell their shares may be challenging unless the target’s shareholder agreement or operating agreement includes drag-along rights. In this case, the buyer may consider structuring the deal as a merger. To complete the merger transaction, the buyer will have to receive consent from the target’s majority shareholder, while minority shareholders may be forced to sell and/or utilize their appraisal rights.
  • Target stockholder approval is usually required. In some cases, the buyer’s stockholder approval must also be obtained. It is highly recommended to consult a corporate attorney to determine whether approvals are required for the contemplated transaction in the specific state.
• Tax consideration: Consult your tax advisor about the tax consequences of the deal.
  
  • If the deal is structured as an asset purchase transaction, the buyer may deduct the purchase price from the buyer’s taxes. However, this may be unattractive to the target from the tax perspective.
• Financing and financial capacity: Determine the most suitable financing options and ensure the buyer has the financial capacity to complete the transaction.
  
  • Seller will usually want to see proof that the buyer possesses sufficient finances to pay the purchase price. Therefore, the buyer may request security interest in the target’s stock and personal guarantees from the buyer’s owner. Security interest should be perfected by filing so that the seller has its interest protected against the buyer’s other creditors. Sometimes, buyers may choose to issue securities to raise capital to finance the deal. In third-party financed transactions, commitment letters from a bank also serve as proof of the buyer’s financial capability.
  • In addition to the ability to finance the transaction, a seller should pay attention to the buyer’s solvency. An entity is generally considered insolvent if the entity’s debts are greater than the entity’s assets. 11 U.S.C. §101(32). If the buyer is insolvent on the transaction date or becomes insolvent due to the transaction, the transaction may be considered fraudulent. 11 U.S.C. § 548. In leveraged transactions, the issue of the receipt of inadequate consideration in a stock purchase transaction may arise.
• Third-party consents: Identify and obtain any required third-party consents, such as from landlords, suppliers, or customers.
  
  • Transaction execution may trigger change-of-control restrictions on the assignment of some material contracts crucial to the business. The contracts must be analyzed carefully to determine if third-party consents are required.

What We Do

Acquisition of business

• Initial discussions & due diligence
• Letter of Intent
• Non-disclosure agreement
• Due diligence
• Transaction document preparation (asset purchase agreement, stock purchase agreement, pledge agreements, guarantees, assignment assumption agreements, promissory notes, escrow agreements, directors’ & owners’ consents, and other ancillary documents)
• Consents and approvals
• Closing

Sale of Business

• Letter of Intent review
• Initial deal discussion
• Non-disclosure agreement
• Sell-side due diligence
• Transaction documents preparation (asset sale agreement, stock sale agreement, schedules, directors’ & owners’ consents, and other ancillary documents)
• Closing