The closing of a merger and acquisition transaction does not bring finality as the term suggests, but instead, particularly for the Buyer, the hard work just begins. However, closing a merger or acquisition deal does lead to a sense of relief for everyone involve, including the Buyer, the Seller and their respective counsels and advisors. After the deal is completed, the Seller must facilitate a smooth transition of ownership and management to the Buyer, without mixing ego, emotion or politics into the transition. On the other side, the Buyer must have procedures in place to prevent the seller from undermining the transition. Similarly, the Buyer should strive to undergo the post-merger or acquisition transition without ego, emotion or politics.
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One of the greatest challenges the Buyer faces post-merger or acquisition is the integration of the two companies – the integration of human resources, corporate cultures, accounting methods, information systems, and other financial practices important post-closing. To address this challenge and create sustainable value, it is important for the Buyer to have an effective transition plan for the integration. Without a strong or effective post-merger or acquisition transition plan, the Buyer risks not to realize the transaction’s value because of overestimated post-merger synergies, wasted time and resources on solving post-closing problems, failed due diligence, litigation or unsolvable company culture differences.
Some of the challenges faced by both Seller and the Buyer after the deal include areas such as finance, personnel, operations, information systems, and many others. The parties need to conduct a thorough labor and employment review and the Buyer must determine the new company’s level of staffing both at management and non-management level. During the post-merger or acquisition transition, the acquirer should determine the profitability and sustainability of the seller’s customer base and decide who stays and who goes. In addition, the Buyer should focus on evaluating the efficiencies to be gained by a merger or an acquisition, including the rent, lease payments and company space requirements. Many of the problems associated with mergers and acquisitions are rooted in a lack of sensitivity to the cultures of the combining entities. However, the parties can avoid problems arising from the clash of corporate cultures by realizing that the cultures of both companies are important and allowing cultural differences to play a part when determining the value of the deal.
Regarding benefit and compensation plans, the focus should be on Employee Retirement Income Security Act (ERISA) covered plans, in particular, defined-benefit pension plans. The options available for ERISA-covered pension plans include terminating the existing plan, freezing the benefits accrued up to the time of the acquisition, merging the two companies’ plans, maintaining two plans or converting to an entirely different plan. Each of these options has benefits and pitfalls that must be considered in the post-merger or acquisition transition. Finally, after the closing of the deal, there are many legal and administrative tasks that the acquisition team must accomplish in order to complete the transaction. These tasks vary with the size of the acquisition and the type of financing method selected by the purchaser.
The importance of a well-planned post-merger or acquisition transition cannot be emphasized enough. Without proper attention to these matters, the value of the transaction may never be realized. Contact us, your business attorney in Florida, to help you devise a strong and effective post-merger or acquisition plan.
Malescu Law P.A. – Business & Corporate Lawyers