What are the issues in Merger & Acquisitions?

The issues in merger and acquisitions are as follows −

  • Financial issues − Buyers will do the analysis of all the financial matters of sellers. It includes past statements, financial metrics and future performances. All monthly statements, audited reports, liabilities, assets, revenue margins, etc. are analysed by the buyer.

  • Technology and intellectual property − Buyer sees technology and intellectual property of seller. It is observed what kinds of steps are taken by the seller to protect its properties, litigations. Moreover, it is observed what kind of licensed technology and how those can help the business, technology history, is there any patents (either domestic or foreign) etc.

  • Sales and customers − Buyer will see the customer base of the seller. Buyer will see if the customers are satisfied with the seller's products, how they can maintain their base, customer's feedback etc. Also, they will check if there are any complaints about the customer's department etc.

  • Strategically fit − Buyer will check whether seller can fit to their company. It will also be checked whether the seller provides required technology for the buyer along with the marginal costs and other strategic issues.

  • Contracts − Buyers will see the contracts and their commitments. For example, loans, credit agreements, supplier contracts, all kinds of agreements, joint ventures, past records, government contracts etc.

  • Management issues − Buyer will see employees and management base of seller which includes organizational charts, policies, cultural issues, labour disputes, compensation and other salary structures, criminal proceedings of employees (if any) etc.

  • Litigations − Buyer will check if there are any complaints (filed or pending), claims threats, settlements, arbitrary matters etc. of sellers.

  • Privacy − Cyber security risks, networking and data flows of sellers, what kind of customer information is gathered, sellers' security programs, policies (both past and present), terms of agreements (old and new) etc. will be analysed by buyers.

  • Tax issues − Buyer reviews seller's tax issues like tax due diligence, government audits, tax agreements, tax returns, correspondence of tax items, withholding etc.

  • Regulatory issues − Buyer wants to understand the activities like are there any limitations for seller antitrust issues, are there any previous investigations to seller, corrupt practices etc.

  • Insurance − Buyer reviews seller's history of claims, liability insurance, property insurance, employee liability insurance, compensation insurances, policies etc.

  • Corporate issues − Buyer reviews sellers' documents and past records like certificate of bylaws, tax authority certificate, jurisdictions, subsidiaries, security holders, stock sale documents, voting agreements, restructuring, minutes of meetings, etc.

  • Environmental issues − Buyer will see what kind of environment issues are faced by seller and review documents like environmental audits, permits, licenses, environmental litigations, any obligations, investigation reports etc.

  • Transactions − Buyer is interested in documents like agreements between seller and employees or stockholders or former employees etc.

  • Regulatory issues − Buyer reviews sellers' citations, governmental proceedings (if any), cost and burden reports, regulatory compliances, governmental permits & licenses, cancelled agreements of sellers (if any) etc.

  • Property issues − Buyer reviews property details (both owned and leased) of seller by reviewing documents of deeds, leases, title reports, sale agreements, condemnation risks etc.

  • Production issues − Buyer reviews seller production related issues which depend on the nature of business. The buyer will review documents like subcontracts, suppliers list, monthly production, inventory reports, research etc.

  • Marketing − Buyer wants to understand the marketing strategies of sellers through franchise agreements, sales form, marketing agreements, press releases etc.

  • Landscape − Buyer will understand sellers' competitive environment by reviewing sellers' technology, competitions, details of product (both advantages and disadvantages), financial strength, market penetration etc.

  • Data − Buyer will see seller's data room because; it plays an important role in success of business. Buyer will see the seller's directory, contents, confidentiality, updates, access to data etc.

  • Disclosure − Seller will prepare comprehensive disclosure by addressing above issues. Buyer will look for contracts and amendments, patients issued, litigations listed, severance arrangements, material matters etc. in the disclosure schedule.

Updated on: 17-Jul-2021


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