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Five Common Problems to Look Out for in a Business Merger

When you want to expand your existing business, one common solution is to seek a business merger with one or more similar or complementary businesses to form a larger entity. Merger proceedings can involve various legal proceedings and exceedingly complex documentation. Therefore, legal representation throughout a business merger can be key to the smoothest and most efficient business merger possible.

You can rely on the experience and knowledge of a Florida commercial litigation attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. to guide you through the business merger process from beginning to end. Here are five common problems you should watch out for as you go through or contemplate a business merger.

Incomplete Disclosure by One Party

Disclosure schedules by both companies that are party to a business merger transaction are vital to the fair negotiation of a merger contract. These schedules provide the facts necessary for the companies to include provisions that are favorable to and protect them. Any mistakes, omissions, or misleading information can create uncertainty, misunderstanding, and ultimately, a breach of contract. Therefore, ensuring that all disclosures are properly made is a key step in any business merger.

Confidentiality Leaks

In a merger, confidentiality is of major importance. Leaked information about even a potential merger or merger talks between two companies can kill the deal. Therefore, your legal counsel needs to create the rules and steps needed throughout the transaction to keep it confidential until all details are finalized. The parties may wish to agree upon a time or stage in the proceedings in which they will be ready to announce the merger publicly.

Failing to Complete Due Diligence

During a merger, one or both companies typically want to examine the other company’s books and records to avoid surprises. Essentially, they will want to ensure that all representations about the company’s financial status are correct. Whether the other company wants to look at your company’s books, you want to examine the other company’s books, or both, you can benefit from our experience examining and evaluating these documents. Together, we can ensure that the merger plans are solid based on the records available and address any concerns or inconsistencies before the merger is finalized.

Failing to Consider All Available Business Structures

When you merge two businesses, one of the businesses will no longer exist. The other business may survive, or the two businesses may create a new entity altogether. The surviving business may be one of many possible business entities, including a corporation or a limited liability company (LLC). Still, for various reasons, that business entity may no longer be as desirable after the merger. Therefore, parties to a merger should consider all potential business entities, along with their advantages and disadvantages, when determining how the business merger should proceed. For instance, the parties should consider the type of business, the expected business operations, tax implications, and more in choosing a business entity.

Overlooking Important Details

Finalizing a business merger requires a tremendous amount of paperwork and great attention to detail. As a result, you may miss important details to include in your merger agreement without legal representation. For instance, while you may think of typical elements to include in your agreement, such as purchase price, inventory transfer, and effective dates, you may not think of existing employee contracts, leases, and service contracts that the other business has in place. You will need to address every detail to ensure that you have a solid contract that leaves no surprises after the business merger becomes final and the merger takes place.

Call Us Today for Assistance with Your Business Merger

At Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A., a commercial litigation lawyer can offer assistance when considering, negotiating, or participating in a business merger. However, we also offer the full range of business-related legal services, whether you are starting, operating, or dissolving your business. We are here to help you navigate the complex legal problems that often arise during the sale of a business in the most efficient manner possible. Call us at (954) 966-2112 or find out more about our legal services online. Set up a time to talk to us about your legal needs today.

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