The 10 key phases of a merger and acquisition deal

Mergers and acquisitions are a part of the business lifecycle, providing opportunities for growth and diversification.

M&A activity, deal structures, and transaction goals can change over time. However, every merger requires careful coordination of many details, especially when the transaction involves multiple jurisdictions or international entities.

The M&A process depends on precise timing and careful execution. Missed compliance or transactional details can lead to delays, penalties, and other risks. This article outlines the key phases of an M&A deal, from due diligence to closing, to help organizations plan and manage the transaction more effectively.

5. Conduct M&A due diligence searches and document review

This is usually the most time-consuming and critical part of any M&A transaction. M&A due diligence requires a detailed examination and analysis of the target company from both internal and external sources. This helps verify the target’s value and identifies liabilities.

Due diligence tasks in M&A include:

• Searches: UCCs, fixture filings, federal/state tax liens, litigation (local and federal), judgment liens, bankruptcy, IP searches, etc.
• Document ordering: Charter documents (all documents on file versus restated forward), records of good standings (long and short form), “bring-down” letters (verbal status checks), credit reports, and more.
• Filings: Formation of shell/holding companies, potential qualification of an entity in multiple jurisdictions after incorporated.

As negotiations progress, CT conducts due diligence to verify value, identify liabilities, and complete all searches – working closely with both buyer and lender counsel.

6. Prepare filings and closing requirements

With due diligence completed, parties make the final decisions on moving forward to execute the transaction. For legal teams, this comes with several responsibilities. Corporate or pre-clearance filings must be made in advance of the closing date. These include merger filings, amendments, ordering of good standings, or issuance of bring-down letters.

Payment of annual franchise taxes may also be required before an entity can properly merge.

Once a merger is agreed to, CT Corporation can help with actions needed before filing merger documents including reserving a name, reinstating an entity, forming an acquisition subsidiary, obtaining supporting documents, and more.

7. Finalize financing, restructuring, and UCC filings

Although financing options were explored during the M&A planning process, the final details typically come together once the purchase and sale agreement is complete.

To help you avoid delays and ultimately close the deal, an independent director/manager, springing member, or special member may be appointed. These directors serve on the boards of your entities to safeguard your assets.

During this phase, you must also file UCC1 and UCC3 forms and conduct post-closing searches to ensure proper indexing of the filed UCCs.

8. Plan post-merger integration and back-office compliance

Managing the integration of an acquired company is a full-time job and should be treated as such. Both parties should work together to ensure a seamless integration. For legal teams this means entity planning and compliance work in the localities involved. Tasks can include the following:

• Entity set up, consolidations, and/or local entity management
• Governance structure changes
• UBO registrations, KYC compliance
• Annual filings
• Registered agent/address services
• Legal representation/directorship services where required
• And more

To meet the requirements of a transaction, a trusted agent is needed to receive service of process and other legal documents internationally.

If your team doesn't have the expertise or the bandwidth for post-merger tasks, leverage the expertise of external resources to help get the job done.

9. Manage post-merger compliance

Post-merger integration is critical to achieving business as usual after an M&A deal. A clear integration plan helps align entities, compliance obligations, and operational processes, which can influence the long-term success of the transaction.

After the long cycle of completing a merger, there is still so much to do. Often, the compliance requirements associated with the surviving and non-surviving entities are the last items to make the list – if at all. In fact, most companies aren’t aware of what’s needed beyond receipt of evidence of the merger. Unfortunately, post-merger compliance is a critical and complex series of activities, and not completing the steps poses significant short-term and long-term risks.

The work doesn’t end there. CT Corporation can qualify your company in new jurisdictions and withdraw it where it will no longer be doing business. We can research and update business licenses and permits, tax registrations, and assumed name registrations.

10. Monitor ongoing compliance after the merger

Once the merger is complete, it’s important to continuously monitor the success of the newly established entity with ongoing good standing and health checks to ensure there are no compliance issues.

Conclusion

The process of completing a merger can be cumbersome. With so many steps to take before, during, and after the merger and tricky timing issues every step of the way, it’s important to have the right support.

Whether at the beginning stages of due diligence, or the high-pressure stages of closing, CT Corporation provides the assistance that private equity firms and M&A attorneys count on to finalize the deal. Our end-to-end project management services are provided through accountable specialists who partner with you every step of the way. Whatever size your enterprise or line of business, CT Corporation has the resources you need to meet your critical M&A compliance needs.