Mergers and Acquisitions (M&A) refers to the process of one business purchasing another business and blending the two together. Merging and acquiring a business is also known as a “take over”.
Mergers and acquisitions and corporate restructuring represent an important aspect of the corporate finance world. Every day, specialized firms and investment bankers around the world arrange M&A transactions, which bring separate companies together to form larger ones. When they’re not creating big companies from smaller ones, corporate finance deals do the reverse and break up companies through spin-offs, carve-outs or tracking stocks.
At “Doing Business in China”, our presence in twenty three countries in the world and our extended network gives us an edge in the market. Our professional network, which comprises law firms, accounting firms, and chambers of commerce in each of these countries, gives us the necessary local hindsight required to perform M&A operations. The resources and knowledge that we have acquired through our experience and network place us at a top position to initiate, follow, and execute the required actions to achieve successful Mergers & Acquisitions.
Mergers and acquisitions have a profitable side that can create potentially enormous profits for a company, and expose the business to a myriad of financial resources. For a company that is on the verge of bankruptcy or in some kind of financial trouble, merging with another company may become the only way to not only save the company, but also to free up some much needed cash and credit.
Acquiring a business for the purpose of creating a conglomerate or a quick sale and turning a profit is part of the allure of mergers and acquisitions. The organization thoroughly investigates the business dealings between the parties involved in either the merger or business acquisition. The proper documentation must be presented as well as the reason for the merger or business purchase. Stakeholders’ concerns must be addressed because once the deal is finalized; all company debt and stakeholders’ issues are inherited by the new ownership. Employees of the company being merged must be fairly compensated, or offered a position within the blended company, re-trained, or referred to another company.
On the other hand, there are certain challenges faced by M&A operators. For instance, in certain countries, regulations prohibit the purchase of land or any type of property or business, making it impossible for M&A to develop.
Within Latin America, there has also been a surge in the merging of businesses with one another, and in some cases, hostile take-overs.
Finally, mergers and acquisitions trends are cyclical, and with banks and other lending institutions refusing to extend credit or make loans, the merging of businesses can slow down dramatically.
Mergers and Acquisitions (M&A) transactions are among the most complex activities a business can undertake. In today’s global market, where not all information is transparent, these transactions present an even greater challenge. Companies include a substantial part of their value creation/synergy targets in the acquisition purchase price.
Due to expected future defaults and economic issues, management – more than ever before – wants to quantify the risk of not being able to meet those targets. Thus, due diligence is a crucial aspect of any M&A deal, as it is the main process that allows to evaluate the health levels of the parties involved, and therefore, of the entire deal. Consultants’ help organizations evaluate the financial, commercial, regulatory and other situations of potential merger candidates and understand the opportunities and challenges that may arise from a M&A operation. Our M&A team includes auditors, former regulators, forensic accountants and experts who provide investigative analysis of businesses including background history, results/projections, cash flows, market analysis, management information, commercial and operational issues, and systems and controls. Our Due Diligence services help companies to:
- Make sure potential issues are addressed early on in the process
- Identify potential management or cultural challenges
- Develop, evaluate and validate quantitative financial models that support critical decisions
- Ensure awareness of regulatory and other compliance issues
- Document the target company’s business processes and control points
Legal Due diligence
Legal due diligence consists of an examination of the legal affairs of the target company in order to uncover any risks, and to provide detailed information regarding the company’s legal situation. A legal due diligence exercise often improves the bargaining power of the buyer.
The objectives of legal due diligence vary from case to case, but some of the typical objectives are summarized below:
- Gathering of information about the target company
- Uncovering the target company’s strengths and weaknesses, risks and advantages in connection with the transaction
- Minimizing the risk of unexpected situations
- Improvement of the seller’s bargaining position
- Identification of areas where representations and warranties from the seller should be obtained in the acquisition agreement.