How to Maintain Your Legal Compliance Audit in VDR
Though achieving a successful M&A is exhilarating, it’s no secret that the M&A process is extremely complex — bordering on tedious at times — as there are many laws, regulations and plain old red tape to plow through. Accelerating the process can be like trying to make a river flow faster, but there are always places you can optimize and streamline to make things go just a little bit more smoothly.
Here, we provide key strategies for making M&As just a little bit easier.
The Mergers and Acquisitions Process
Conducting the M&A process is a series of activities and actions that are legally and financially required when two companies combine, by either merging (forming a new company) or by acquisition (with the target company becoming a division of the acquiring company). Both the buyer (acquiring company) and the seller (the target company) need to follow this process.
Although there are many different types of mergers and acquisitions (including lesser used types, including tender offers, acquisitions of assets and management acquisitions), the process remains fairly consistent throughout any process.
Typically, steps in the M&A process are:
- Strategy: Deciding what the endgame is of the M&A. Typical goals include increasing profit, acquiring assets, increasing market share or reducing risk — all of these factors drive the strategic decisions around a specific M&A unfolds.
- Picking (and Contacting) Candidates: Researching what (and who) are the appropriate target companies.
- Financial Deep Dive: An in-depth analysis of the potential target company is required, which always requires lots of proprietary and confidential data supplied by the target company.
- Negotiation: As in any other business transaction, it’s a matter of working out terms and conditions, and, of course, price, by both parties.
- Due Diligence: Conducting due diligence is vital to the entire procedure; it’s a process that puts every aspect of the target company under a microscope and gives the acquiring company an exact picture of the target’s financial positions and operations.
- Sealing the Deal: Once all the previous steps have been completed, it’s time for any final negotiations by both parties regarding the logistics of the transaction. This includes financial aspects as well as the legal issues.
- Post-M&A Integration: Here, both parties work to integrate into one organization, with the goal of seamless integration and an eye on maximizing value.
What Are Some Strategies to Streamline Mergers and Acquisitions?
Each step of the process outlined above can include hundreds of sub-tasks to complete, which is why the M&A process can be drawn-out and extremely time consuming. Though there are certain laws both parties have to adhere to in order to legally complete an M&A, there are ways to streamline things without cutting corners on due diligence.
The key to streamlining is to anticipate any issues that may arise during every phase of the project. There ARE going to be issues; however, the earlier you can anticipate and clear these roadblocks, the smoother the rest of the transaction will go.
The following are some additional ways to help streamline the entire M&A process:
1. Define the Roles and Responsibilities for the M&A Process
Knowing the critical roles and responsibilities for the entire process is key in every M&A transaction. This group includes members of your company, namely the CEO (decision maker) and the CFO (responsible for the financial aspects of the deal). In addition, there are usually non-employee consultants, bankers, financial advisors and legal professionals like M&A lawyers involved. Making sure that the roles of all the players in the process are clearly defined helps avoid stepping on each other’s toes or leaving gaps where an important element is missing or falls through the cracks.
2. Conduct Due Diligence
In the M&A world, there are multiple categories that fall under the umbrella of due diligence. These include all things financial and technological, intellectual property (IP), legal issues, employee/staffing issues, tax and regulatory matters and insurance, among others.
Make sure to confirm that all information from both parties during the transaction is up-to-date and verifiable. Remember, a lot of this information has legal ramifications, so it’s mandatory that all parties involved in the M&A dig deep within the documentation to find any hidden issues.
3. Centralize Documentation and Coordinate Communication Between All Parties
Timelines and deadlines are often a moving target during M&As, so communication is crucial during all phases of the M&A process.
This includes ensuring all relevant documentation, policies, procedures and any other data is easily accessible and logically organized. Having the ability to maintain security but allowing the data to remain searchable by approved parties is paramount. Storing this data in a single, secure location will allow both parties access to the information without wasting time attempting to locate a particular document.
4. Employ a Virtual Data Room
A virtual data room (commonly referred to as a VDR) is a critical tool in the M&A process. A virtual data room is an online location where companies can store (and share to others with the appropriate credentials) confidential information that is encrypted. A VDR contains tools and features that can help organize (and search for) all documentation related to the M&A.
Partnering with an experienced virtual data room provider will give you an essential set of tools such as document and version management, high-level admin controls, multiple layers of security and 24/7 customer support. In addition, enterprise-level encryption, a user-friendly interface, the ability to seamlessly be able to upload (and download) documents to and from your virtual data room and the ability to update and edit files in your workspace are required to help move the M&A process along.
5. Manage Expectations
Managing expectations is crucial throughout the process to ensure the deal doesn’t fall apart, but even more so when it comes to understanding of how the business process will work post M&A. Having everything mapped out in advance will certainly help make things more efficient in the post-merger. In addition, for the merged company to function properly, IT processes, data and infrastructure has to create equal or greater efficiency than before.
In Conclusion
Though the M&A process will never be linear, there are plenty of strategies and tools you can employ to help streamline things. Having a technology partner like Caplinked that is trusted by Fortune 1000 companies around the world to keep their M&A processes efficient and secure can be a huge step forward in helping your business execute deals successfully. Interested in learning more? Start your free trial today.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.
References
https://hbr.org/2003/03/your-best-ma-strategy
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