Mergers & Acquisitions Lawyers
Mergers and acquisitions go to the heart of the technology’s industry’s story. You won’t find a successful startup story without an M&A episode, while it’s commonplace for big tech to be acquiring a company at a rate of one every fortnight.
But M&A means either taking the competitive, structural and legal complexity of your own organization and doubling it, or submitting yourself to an energy intensive and complicated due diligence process. That’s before you get to the structure of the deal itself. To secure the right deal and settle on fair terms, experienced lawyers for technology businesses make a difference.
How big is it?
Precise country-specific industry data for M&A activity can be difficult to come by because many transactions occur amongst unlisted companies for undisclosed amounts. But we all know investment bankers make a bucket-full and that leaves a trail we can follow.
According to a recent report by JPMorgan, US companies on the S&P 500, excluding financials, have a record US$2 trillion (A$2.8 trillion) in cash and short-term investments on their balance sheets primed for M&A activity, while private equity firms have US$2.3 trillion.
Last year, a record US$402.6 billion in announced M&A activity was recorded involving Australian companies, according to Refinitiv. M&A volumes also hit an annual record globally in 2021, totalling US$5.9 trillion. Numerous investment banks expect technology to be one of the major drivers again of M&A activity globally and Australia will be no exception.
Examples of recent M&A activity.
- In August 2021, Afterpay was acquired by Jack Dorsey’s Square for $39 billion in what was a game-changing transaction for not just Australia’s technology industry, but Australian industry in general.
- In April 2021, Woolworths acquired a majority stake in data analytics firm Quantium for $223 million.
- In October 2021, CitrusAd was acquired by French advertising giant Publicis Group for a reported $202 million.
- In September 2021, AI business Faethm was acquired by Pearson Education, a global learning company focusing on textbooks and online courses. Biztech Lawyers assisted Faethm with the sale.
How we can help
If you think the next step for you is to buy or sell a business, a business acquisition attorney will be able to advise you on the most strategic method for your specific case. This will depend on commercial, legal and tax factors, third-party and corporate consents and your timeline.
As lawyers for technology businesses, there are three typical ways to go about acquiring or selling a business:
- Direct or indirect mergers
- Buying the target company’s stocks or shares (securities)
- Buying the target company’s assets
A merger is when two companies combine into one legal entity. While some private companies do make use of this structure, it’s more commonly seen in transactions between public companies.
Private companies generally see securities or asset acquisitions instead because the acquiring company is typically larger. However, that doesn’t necessarily mean the founders and executives are turfed. With strategic negotiations, the same people can be kept on or brought into management in the parent entity. This can either be underwritten into the transaction or as an ancillary deal. It all depends on the negotiations.
International business acquisitions will involve multiple jurisdictions and laws. M&A attorneys will be keenly asking the following questions. Whose do you follow? Is it where your offices are registered? Is it where you actually conduct business? Is it where the assets and subsidiaries are located? How large is the deal and how is money moving? Depending on the answer, you’re going to be dealing with several notification requirements and regulatory oversight.
Business structure lawyers can pick up issues in any of the many stages listed above. Things will go smoothly if the target company’s corporate house is in order and all documents and supporting documents are on-hand. Unfortunately, that is rarely the case for startups and technology businesses without an in-house legal team.
Each country will have different requirements and deadlines, so you want to plan your time frame before you begin negotiations. Otherwise, you might face fines and delays that could cost you the whole deal.
For technology businesses and startups, one of the most vital aspects of successful post-acquisition growth is talent. Value is not only centered in the Intellectual Property being acquired, but in the talent that has created and managed that IP. In nearly all acquisitions in a study by Harvard Business Review, pre-acquisition managers retain their original positions. This and their compensation will typically crop up during negotiations.
The Business Acquisition Timeline: Buying and Selling Stocks, Shares and Other Securities
- Sign NDAs – This is an extremely important aspect, especially given strict disclosure laws for listed entities.
- Initial Negotiations – This will take a lot of back and forth where both parties agree on the estimated value and what will be sold.
- Due Diligence – The seller will open a data room and give the potential buyer access. The buyer will make the necessary enquiries and investigation into the business, requesting for relevant supporting documents as necessary.
- Purchase Agreement – Once the buyer is satisfied with the state of the target company, both parties will undertake negotiations on the actual sale. This will involve the seller making several disclosures and warranties relating to the condition and state of the business as well as a risk allocation.
- Ancillary Documents – When the parties are satisfied with the major terms of the purchase agreement, they can begin drafting ancillary documents. These are the documents that will actually facilitate the sale such as the stock or share transfer form and board resolutions.
- Completion – Depending on the agreement, you can have simultaneous signing and completion. This means the sale is complete, ownership and money is transferred upon signing. In certain circumstances, completion will occur after signing after certain conditions are satisfied like completing deferred payments.
Our Experienced Business Acquisition Attorneys
We have a proven track record of successful multimillion dollar business acquisitions and sales. Whether you’re acquiring a new business to improve your own tech stack or if you’re planning an exit or growth through sale, make sure you walk away with exactly what you want.
You can check out our track record for more successful deals and transactions.
Talk to an experienced M&A Lawyer
Whether you’re trying to exit the business, buying another business to grow, or selling while staying on as management, we have an international team on hand to help you out whenever you need it. Contact us today!
Featured Mergers and Acquisitions
Acquisition (Buy Side)
Provided buy-side legal support in Rokt’s acquisition of calendaring business Calreply.
Acquisition (Sell Side)
Provided sell-side transactional support for Quadpay in its acquisition by ASX-listed Zip Co Ltd.
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