Why you need to keep your deal teams small for mergers & acquisitions
When entering into mergers and acquisitions, protecting yourself and your company should be the highest priority
It goes without saying that when entering into mergers and acquisitions (M&A), protecting yourself and your company should be the highest priority.
However, like with many other business matters, too much of a good thing can wind up being bad, as is the case with M&A deal teams.
Although the professionals that make up such a team are vital to making smart business decisions and covering a business, inviting too many people to be on the team can cause significant problems.
Why are M&A Deal Teams Important?
Many M&A plans fail because organizations haven’t carefully planned their next steps. They might have an excellent grasp of the big picture but lack an integration plan with the logistics to iron out and implement the details of the M&A. A mergers and acquisitions deal team helps draft and manage a process while paying attention to every aspect of the deal, such as its financial and management concerns. Without an M&A team in place, essential factors will more than likely fall to the wayside, setting the deal up for disaster. Most deals fall apart in the negotiation phase and plenty of these fallouts can be prevented with a team of professionals.
Deal teams help ensure that every aspect of the M&A is studied and evaluated from a business standpoint. Considering this, it would make sense that some companies employ M&A deal teams that are 40 to 50 people deep. However, such a large number is often excessive and unnecessary, and in fact, it can also be a detriment to the company and the deal as a whole.
Why You Should Keep Your M&A Team Small
A lot of confidential information is exposed and shared during M&A. This information should only be revealed on a need-to-know basis. Otherwise, it leaves all involved parties open to excess risk. The more members on the M&A team, the greater the risk is. Leaked information can hurt not only the deal at hand, but the companies involved.
Flexibility and Scheduling
Frequently, M&A deals need quick action. They can’t wait around for days, let alone weeks, while dozens of people sync their schedules to be able to meet to talk about the deal. With a smaller M&A team, there’s more flexibility and ease of scheduling, which means not missing out on critical deals. The ability to meet, and meet quickly, significantly increases with fewer deal team members. In turn, the organization has a better chance at achieving the deals they desire.
Decreased Confusion and Increased Focus
When you have too many cooks in the kitchen, so to speak, the process and the end goal can become confusing. The more people on an M&A team, the narrower each individual’s focus can become. Focusing on how one-part fits into the whole can become difficult, if not nearly impossible. With a smaller group, each person generally knows what the other’s tasks and responsibilities are. They know whom to ask if they have a question or a problem.
Ideal M&A Teams
Deal teams handle the negotiation, closing, and integration stages of the M&A process. An ideal M&A team for most deals can have five members. These members should consist of:
- A leader/advisor who has the authority to work with everyone involved and the expertise to understand the necessary steps. This person should be an expert as they will be the one calling the shots.
- Accountants/money managers should handle the accounting, taxes, investments, and valuation of the M&A. They will likely work closely with the legal team.
- C-suite executives and human resources professionals who will help with deal-making and the agreement’s success once it’s been implemented.
Last but not least, seasoned legal counsel should be included on your M&A team. M&A attorneys can help you understand all the implications of the deal at hand. Be sure you have attorneys who are experienced with M&A laws and agreements. They will likely need to sign off on every part of the deal, ensuring it complies with local, state, and federal laws. Legal counsel should be considered in the framework of keeping you out of legal trouble instead of helping you out after you are already in hot water. In M&A deals, they can assist with offboarding redundant employees, creating retention agreements and severance agreements.
Covering your business is always a worthwhile endeavor when you’re entering into M&A. Still, you can go too far by building an unwieldy integration team. These deal teams become especially critical when your company is buying a large company.
With the necessary elements in place, companies of all sizes that want to grow through acquisitions don’t necessarily need a large corporate M&A group. Instead, they can build up a smaller core of well-versed deal makers who can enlist help as needed.
Doug Griess and John Snow of Hackstaff & Snow, LLC, are top Denver business attorneys with expertise spanning various industries. Specializing in business law, litigation, intellectual property, tax law, and dispute resolution, John Snow and Doug Griess offer an in-depth understanding and knowledge of general corporate rules and regulations and are a trusted resource for business owners throughout Colorado.