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Top considerations when preparing for a merger or acquisition

On Behalf of | Oct 30, 2023 | Business Law

Someone who owns or runs a business that has proven successful may want to plan for rapid expansion. A merger with another company is one way of facilitating relatively quick growth. An acquisition or purchase of another organization could also lead to much faster growth than a company could sustainably generate on its own.

However, mergers and acquisitions often lead to challenges that owners and executives fail to consider before they arise. Addressing the three considerations below during the planning stage of a merger or acquisition can take some of the frustration and guesswork out of these major business transactions.

Will employees have reason to sue?

Downsizing often follows mergers and acquisitions. Businesses have to streamline their operations by getting rid of redundant positions. Sometimes, workers can fight back by alleging wrongful termination. Particularly when certain groups seem to have more representation in the pool of terminated workers than others, such claims may lead to successful lawsuits. A thorough double-check of all personnel decisions is typically necessary to protect the company against allegations of wrongful termination after a merger or acquisition.

Will the merger unfairly affect the marketplace?

Occasionally, regulatory authorities ranging from federal agencies to state government officials may intervene in planned mergers and acquisitions out of concern for the marketplace. They could potentially prevent the transaction from taking place. When two businesses that play an outsized role in a particular industry combine their resources, they may become a monopoly or have too much control over a specific industry. Therefore, it is crucial to look into the possibility that a merger or acquisition would lead to pushback because of how powerful it would make the resulting company.

How much talent will the company lose?

Major changes at an organization inevitably lead to some of the workers deciding to leave. Occasionally, organizations may lose some of their top performers. Executives and entrepreneurs planning mergers and acquisitions may want to disclose those plans to specific workers ahead of time as part of a renegotiation process to retain that talent. Otherwise, the best and brightest may look for opportunities elsewhere out of concern that the company will fail or liquidate positions, possibly including their own.

Identifying and addressing top risk factors when preparing for major business transactions can increase the benefits of such transactions and reduce the overall risk involved. Seeking legal guidance proactively is a good way to get out ahead of such risks in concrete ways.

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