The Business Lawyer s Expanding Role in Facilitating Small and Mid-Sized Merger and Acquisition Transactions

• Author: Andrew J. Sherman
• Position: Graduate of the Washington College of Law at American University
• Pages: 03

Andrew J. Sherman is a 1986 graduate of the Washington College of Law at American University and recently joined Dickstein Shapiro Morin & Oshinsky LLP. He previously served as a Capital Partner in the Washington, D.C. office of McDermott Will & Emery LLP, an international law firm with over one thousand (1,000) attorneys worldwide. Mr. Sherman is a recognized international authority on the legal and strategic aspects of business growth, with a focus on mergers and acquisitions, capital formation and the leveraging of intellectual property. Mr. Sherman is an Adjunct Professor in the Masters of Business Administration (MBA) program at the University of Maryland and Georgetown University where he teaches courses on business growth, capital formation and entrepreneurship. Mr. Sherman is the author of twelve (12) books on the legal and strategic aspects of business growth and capital formation. His most recently published books include The Complete Guide to Running and Growing A Business, published by Random House in November of 1997 and Mergers and Acquisitions: A Strategic and Financial Guide for Buyers and Sellers published by AMACOM in March of 1998 and Parting Company published by Kiplinger's in May of 1999, as well as Raising Capital published by Kiplinger's in Spring of 2000 and Fast Track Business Growth, which was published by Kiplinger's in January of 2002. Mr. Sherman can be reached at (202) 883-5000 or e-mail ShermanA@dsmo.com.

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BUYERS AND SELLERS OF COMPANIES look to their legal counsel for guidance on a wide variety of strategic, regulatory, and financial tasks beyond the obvious roles typically played in the due diligence process and in preparing and negotiating the acquisition documents. In a larger "Wall Street-style" transaction, the advisory team is often very large and the role of counsel is often narrower and more clearly defined. However, in deals involving smaller and mid-sized companies, the role of the business lawyer is often expanded to include a wide variety of responsibilities from financial advisor, to corporate strategist, to creative problem solver, to quasi-investment banker, to emotional soundingboard, to family business counselor. To be an effective advisor in one or more of these roles, a business lawyer will need to really understand the key aspects of the client's business model and plans, as well as trends in the client's industry. Effective advising may also require training and expertise in fields as wide-ranged as strategic planning, accounting and finance, tax, and even psychology.

It is critical to understand that for many sellers of a business that has been owned and grown over a long period of time, the sale of the company will not only be the most important financial event of their lives but also the most emotional. An effective business lawyer will help his or her client prepare for this transaction at an early-stage in the process, with a focus on a legal audit to identify potential problems and prepare for the buyer's due diligence request, the review of the offering memorandum, the review of the projected valuation and pro forma or restated financials, and estate planning and related issues which will be relevant following the closing of the transaction. In a future article for the Business Law Brief, I will discuss the lawyer's role in representing sellers of small and mid-sized companies in greater detail. The chart below provides an overview of each attorney's role which is driven by the role of the client in a given transaction.

This article focuses on the role of the buyer's counsel. As counsel to a company which will be acquiring other businesses, it is critical that the business lawyer ensure that the client has gone through the Acquisition Planning process in order to define the goals, objectives, screening processes, and selection criteria for the proposed transactions.

[NO INCLUYE TABLA]

Acquisition Planning

ONE OF THE KEY CRITICAL TRANSACTIONAL SUCCESS DRIVERS for buyers of companies is the preparation and execution of an Acquisition Plan. The Acquisition Plan: (1) analyzes key trends in the target's industry, (2) identifies the method for finding candidates, (3) defines the criteria which will be used to evaluate candidates, (4) sets forth the targeted budgets and timetables for accomplishing the transaction, (5) defines the price ranges to be considered, (6) articulates the amount of external Page 10 capital which will be required to accomplish the transaction, (7) identifies the internal and advisory teams for the transaction, and (8) sets forth the decision-making and approval process. One of the goals of the Acquisition Plan is to "narrow the field" of candidates as quickly as possible to avoid wasting time and resources. Other benefits of having a well-prepared Acquisition Plan include:

- providing a road map for the company's leadership to follow;

- informing shareholders of key objectives;

- reducing professional and advisory fees;

- mitigating the risk of doing a transaction that a client will later regret;

- identifying post-closing integration challenges well in advance; and

- informing sellers of your plans for the company...