Why you need them both.
Mergers and acquisitions (M&A) transactions are as complex as they are tricky to navigate. Each is different, with varying dynamics influenced by factors unique to the businesses involved. These variations can include proprietary technologies & processes, critical employee risk, shareholder goals, tax considerations, and more, which can significantly affect a deal’s approach and outcome.
Despite the complexity, some business owners try to handle M&A without professional advisors. For most, this is their first, or perhaps second, deal. Due to their limited experience, critical legal and financial issues may be overlooked, and money left on the table. A professional team of advisors who have completed hundreds of transactions brings the experience needed for success. Business issues and positioning led by the investment banker and legal points driven by the M&A attorney are critical to building, capturing, and preserving value throughout a deal.
Every company and every transaction have issues, and it’s essential to find and resolve potential problems quickly while keeping the forward momentum of multiple deal aspects. The buyer often wants one thing and the seller desires something completely different. The two are often mutually exclusive. The investment banker and M&A attorney have likely worked through and resolved similar opposing factors before and relying on their experience from hundreds of deals are able to craft a business and legal construct that can satisfy both parties. In other cases, it requires insight into the impact on the transaction, the selling shareholders, and the operations, along with a legal understanding of how everything will work long after a transaction is completed to develop the right solution.
More importantly, the best defense is a strong offense, and the combination of an investment banker and an M&A attorney can help identify potential issues before they become a problem. Getting ahead of potential problems and alleviating surprises before going to market or responding to diligence is vital to protecting and securing deal value. Ultimately, the ability to draw on the experience that your investment banker and M&A attorney have on what will get the other side over an issue, comfortable with the explanation or an action plan, is key to a successful deal.
Another aspect of a transaction that relies on this deal team is the negotiations of the details. Negotiations are a crucial aspect of every deal process and details matter. Many details require deep assessment to ensure they match the parties’ intent. Often, ideas and solutions are discussed at a high-level that may sound balanced and appropriate. But the details of definitions, responsibilities, authorities and what is included/excluded may throw the transaction out of balance. Figuring this out upfront is key.
Getting the details of the business deal right is the role of the investment banker. Making sure the legal language matches the business intent is the role of the M&A attorney. When they work together, they create a solution that is viable long after the deal closes.
There is often a robust and meaningful negotiation when the solution is challenging. Effective negotiations rely on the power of connection with the other parties – understanding the issues from the viewpoint of all involved and developing a rapport.
In a transaction, every element has two viewpoints – the business perspective and the legal point of view. Experts in each help the entire team see all points of view – business, legal, and often regulatory. In turn, the different personalities and styles allow you to leverage the banker and lawyer to help advocate for their clients at different times and simultaneously, as well as from multiple channels. They can trade off negotiations at appropriate times in the process to improve the outcome for the client. This tradeoff can look much like a detective drama, with the investment banker being the bad cop and the attorney the good cop during one phase, and when the time is right, switching roles to achieve the desired outcome.
Beyond the required experience set, getting a good transaction done takes considerable time. While trying to run the business, think about managing these discussions, negotiations, and information requests. Most senior executives and business owners have a full schedule and haven’t the time to evaluate materials, determine the best positioning and manage the many back-and-forths of a transaction. Taking on the work of an M&A project will be overwhelming, even with help. Therefore, it’s vital to have an experienced team of advisors who can handle the complexities of the process and day-to-day details, allowing owners to concentrate on their strengths and core competencies. With a reliable team, business owners can be confident that their deals are being guided in the right direction. At the same time, they can focus most of their attention on the organization’s operations and profitability.
The investment banker leads the business aspect of the transaction, preparing to go to market, engaging with potential counterparties, and positioning. They do this with guidance and input from the attorney who leads the deal’s documentation, tax, and regulatory elements. Success depends on them both working together as partners. Along with the client, this trio forms the perfect team to drive success.
Finally, it’s essential to consider the emotional aspect of M&A deals. These transactions can be life-changing and stressful for business owners and shareholders – it’s vital to understand the steps involved and what to expect. Experienced investment banking and legal professionals can help ease stress by offering clear and practical business and legal insights and guidance. Together the investment banker and M&A attorney educate and coach clients on beneficial behaviors during management meetings and negotiations, such as how to dress, their demeanor, and especially what they should or should refrain from saying. A client who’s well-educated on the process feels more in control and confident and is less likely to make a misstep that could harm the transaction.
Overall, a team approach to mergers and acquisitions is necessary, and a strategic partnership between investment bankers and M&A attorneys is well-equipped to navigate the complexities of deals, providing successful outcomes, increased value and needed protections for clients. They’re the M&A dream team.