An owner must consider why he or she is buying or selling a company. From the buyer's perspective, the acquisition may be an opportunity to expand into new markets, acquire products that fit with the buyer's strategic plans, improve operating margins or acquire talented people, including possible successors to lead the company in the future. The buyer needs to understand the seller's intentions. Is there no clear successor plan? Is the competition for its products or services too difficult? Is the seller getting out of a bad business?
From the seller's perspective, an acquisition or merger may be an opportunity to continue the legacy of the business, to provide a better opportunity for key employees, to improve margins or to run certain businesses more efficiently and profitably. Again, the seller must understand why the buyer is interested. Is the buyer interested in expanding market share, expanding its products and services, protecting key employees or just interested in the cash flow? Some details to consider include whether to structure the transaction as an asset or stock sale (in a stock sale the buyer generally inherits the existing liabilities); the scope of representations, warranties and indemnities, environmental issues and litigation pending or threatened: agreements for key employees; real estate; non-competition agreements; intellectual property; and confidentiality.
Finally, Keep the lawyer out of the room until the key business points are agreed upon. The lawyers may try to win too many legal points and could lose focus on the business reasons for the deal. The last factor to consider is whether the merger or purchase will be successful. Maintaining the culture of the acquired company and its reputation in the industry will go a long way in incentivizing key employees to make the merger successful. Bob Iger of Disney bought Pixar in 2006 and Marvel Entertainment in 2009 and maintained the leadership and culture of each company. Both acquisitions were successful.
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