Introduction
M&A integration is a complex and dynamic process that requires considerable skill, forethought and dedication. Proper management of the integration process requires an understanding of the legal and financial considerations as well as the operating aspects of the deal. This article will provide an overview of the legal and financial aspects of merger and acquisition (M&A) integration.
Legal Aspects of M&A Integration
Legal considerations for M&A integration include the relevance of certain regulatory bodies and compliance of the deal with their respective laws and regulations. In the United States, the Securities and Exchange Commission (SEC) is the primary regulator of corporate mergers and acquisitions, while in other countries relevant authorities would be their respective counterparts. The first step in the M&A legal process is the filing of Form S-4, which provides a description of the merger and associated documents. Other legal considerations include the creation and negotiation of definitive agreements such as the purchase agreement, closing documents and employee benefit plans; and due diligence activities, such as the review of financial statements and legal documents. To ensure that the transaction is legally compliant, the parties are obligated to actively cooperate throughout the process.
Financial Aspects of M&A Integration
Integration of financial aspects of the deal requires understanding of the sources and uses of funds associated with the merger. This includes forecasting excise taxes, loan fees, deal-related costs and other cash expenditures. Financial analysis of the combined company should include the impact of the merger on its pro forma financial statements, such as balance sheets and income statements. After the transaction is closed, an evaluation of the parties’ debt capacity and cash flow should be made to determine their ability to service the additional debt and pay any contractual obligations.
Conclusion
M&A Integration involves a complex legal and financial process. The legal steps necessary for a successful transaction include filing certain required papers with regulatory bodies and negotiating definitive agreements with the other parties. Financial aspects require understanding of the sources and uses of funds associated with the merger, impact of the transaction on the combined company’s financial statements and its debt capacity and cash flow. It is important for all parties involved to have a thorough understanding of all aspects of the transaction to ensure a successful integration process.
