Five Issues That Can Arise During Mergers and Acquisitions

Mergers and acquisitions are some of the most complicated processes any company can go through. While potentially quite profitable for the companies involved, mergers and acquisitions are full of hurdles and challenges that can become costly if mishandled. Here are five issues that can arise during the process of your merger or acquisition:

1. Disputed Terms in the Merger/Acquisition Agreement

Some of the most basic problems in mergers and acquisitions can start right after the deal has been struck. If there are any terms in the merger or acquisition agreement that are disputed (such as might result from ambiguous or unclear language), it can result in major problems that can hinder the merger or acquisition process. That is why you need to make sure you have experienced legal counsel who can identify these potential issues before they become a problem.

2. Transfer of Company Assets

Another set of problems that can arise during mergers and acquisitions is the result of transferring company assets from the acquired company to its new owner. This can include material goods like equipment or vehicles, real estate, as well as bank accounts and intellectual property. Ensuring a smooth transfer of ownership is essential to avoiding potential disputes in the future — and to ensuring no valuable assets are left behind.

3. Fulfilling Existing Agreements and Obligations

Purchasing or merging with a company does not merely bring their assets along, however. It also brings all of their existing contractual agreements and obligations, which will need to be resolved one way or another. This can include business deals, unpaid wages or benefits, as well as the costs of maintaining or insuring certain assets. The acquiring company can either fulfill those obligations, or pay the cost of no longer being able to do what the acquired company promised — either of which can be potentially expensive.

4. Dealing with Debts and Liabilities

In addition to becoming responsible for an acquired company's prior contracts and obligations, a company undergoing a merger or acquisition can also take on any of the company's debts and liabilities. This means, for example, that a company may undertake a merger and find themselves responsible for paying off a loan the acquired company had taken out. It could also mean they are sued for any torts, breaches of contract, or other legal problems that faced the acquired company.

5. Closing Conditions

With any merger or acquisition almost certainly comes issues with closing the deal. This may include getting approval from a company's shareholders or board of directors, or obtaining a certain amount of cash or equity to finance the deal. Working out these terms is an essential part of mergers and acquisitions, and a part you should not handle without experienced legal counsel.