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Acquiring an existing business is a fantastic way to diversify your holdings or expand into a new market. However, business acquisition law is complex, and even minor errors can expose you to lawsuits, negatively impact your returns, or even lead to the total loss of your investment. The basic primer below explains what actions to take and what to avoid if you’re planning a takeover.

Do: 

Conduct your due diligence. 

The buyer is responsible for researching the target company’s position in the market, reviewing their financial records, intellectual property, and inventory, and asking questions about pending legal matters. Conducting due diligence is crucial for protecting your interests, determining the value of your investment, and assessing risks. It also puts you at an advantage for negotiations. 

Hire a business acquisition law attorney.

Business acquisitions are financially and legally complex processes that have significant impacts on the health of your business, so it’s always in your best interests to hire a lawyer with specific experience. Your attorney will ensure the business valuation is fair, review and draw up contracts, and identify potential problems before they arise.

Don’t: 

Miscalculate the value of the business. 

business acquisition lawEvery buyer in an acquisition wants to ensure an optimal return on their investment, but sellers also need to feel that they’re receiving a fair price. Undervaluing the business can cause the current owners to abandon negotiations, while paying more than the organization is worth wastes money and makes it more difficult to recoup your investment. A comprehensive and suitable valuation method that incorporates all documents gathered at the due diligence phase should be used. 

Choose the wrong deal structure. 

When acquiring a business, you can either choose to purchase its assets or enough stock to gain a controlling interest. Each approach has its advantages and drawbacks, so speak to an attorney before deciding how to structure the deal.


 

Since 1946, the business acquisition law attorneys at Zangari Cohn Cuthbertson Duhl & Grello P.C. have provided sophisticated solutions to clients throughout Connecticut, Rhode Island, and the rest of New England. Whether you’re acquiring a competitor or merging with another company, their lawyers have the experience and commitment to ensure the process is as smooth and successful as possible. Visit their website for more on their business acquisition law services, follow their Facebook for updates, or call (203) 789-­0001 to schedule an appointment.

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