In the world of mergers and acquisitions (M&A), major organizational and financial changes are likely for the companies involved. As such, many companies turn to M&A consulting to improve the chances of a successful deal that is beneficial for all parties.
In this article, we'll discuss how consultancy in M&A deals works, along with the steps to take when hiring a lawyer for M&A consulting. In any case, you can check out our directory of the best M&A lawyers if you're looking for legal professionals to work with you and your company.
What is M&A consulting?
M&A consulting refers to professionals, such as lawyers and consultants, advising or assisting clients on a deal, including the changes that will follow a merger or acquisition. Its goal is to ensure two main things:
- the success of the deal, by preparing the company for both opportunities and potential problems during the process
- that all Canadian laws on M&As are observed after closing the deal and during the integration of the two companies
Also called advisory or deal services, M&A consulting is used by both the acquiring company and the target company, since both sides typically have their own lawyers during the deal. In practice, when companies decide to pursue an M&A deal, engaging M&A consultants early can be an important part of that decision.
As we explain how this advising works below, here's a video that explains M&A consulting:
Looking to hire Canadian lawyers for M&A consulting? Head over to our directory of the best mergers and acquisitions lawyers in Canada as ranked by Lexpert.
How does M&A consulting work?
M&A consulting starts when the idea of a deal is first raised:
- for the buying or acquiring company: M&A consulting helps the company decide whether an M&A deal makes sense and how to approach it
- for the target company: the company being approached uses M&A consulting to assess whether the offer is worth considering
From there, these advisory or deal services continue not only through closing, but also until the integration phase is complete.
Here are the other stages of M&A deals that consulting is a part of:
Advising on valuation for the buyer or seller
Valuation in M&A process can mean any of the following:
- when the buyer evaluates its own capabilities to enter in an M&A deal
- when the buyer determines the true value of the target company
- when the target company wants to know whether the buyer is the right fit for a merger or acquisition
In these cases, M&A consulting helps the company get a full picture of itself and of the other party in the deal.
Acquiring company's valuation
M&A consultancy may also begin as early as the valuation of the acquiring company. During this valuation, the company:
- evaluates its internal problems and external factors
- looks for approaches it may take to address the issues that it currently faces
- gathers and organizes all necessary documents for the upcoming negotiations
Valuation of the target company
One important reason why advisory services are popular is that buyers need help measuring a target company's true worth. Good advice would definitely help the buyer see the target company's real value, manage risk, and close the deal on terms that match its goals.
Acting as valuation teams, lawyers for M&A consulting can offer complete and objective valuation of both public and private companies. They can:
- inspect and put a value on the target company's real properties and intangible assets, such as intellectual properties and customer relationships
- identify goodwill calculation and purchase price, then, coming up with a fair value assessment on the target company as a whole
- prepare valuations of assets and business interests and cost segregation studies for tax purposes and financial statement reporting
These valuation issues are best addressed by consultants and advisors, who can help both companies make informed decisions from a financial perspective.
Developing a feasible M&A strategy
M&A consultants help companies create a good M&A strategy, which must:
- be in line with the company's overall goal, or with the objectives that must be achieved by the M&A
- balance out or minimize the underlying risks in M&A deals, as applied to the parties and their circumstances
Lawyers working in M&A consulting can also guide the company in forming the M&A roadmap and timeline. This will help the company save time, manpower, and financial resources. If an M&A deal is the best option, the buyer can then look for target companies to merge with or acquire.
Screening the possible target companies
Based on the M&A strategy and roadmap, choosing the right target company is best handled by the M&A consultants along with the corporate M&A team. With the wide resources and connections of the M&A consultants, searching for potential targets and even possible investors is made easier.
Helping in the negotiation stage
Once both companies decide to pursue the deal, which may be non-binding at this stage, they will try to agree on terms that are acceptable to both sides. At this point, the lawyers for M&A consulting, along with the M&A team of the two companies, will transition into the following:
- getting the best deal: ultimately, securing a good deal for the company they work for is the best indication that the M&A consultants have been effective
- putting forward their client's interests: based on their expertise, it also their job to guide the clients on how to negotiate with the other party to protect their interests
Notably, M&A consultants are also careful in dealing with the other party during the negotiations to avoid throwing everything away. As such, it's important to balance necessary concessions with firm protection of key interests.
Conducting all aspects of due diligence
The process then moves into conducting the M&A due diligence. This process is a rigorous analysis of the other party that may affect the success of the deal, which is where lawyers working in M&A consulting have particular expertise.
Watch this video to learn about due diligence and how it is effectively conducted with the help of lawyers for M&A consulting:
Bookmark our Special Edition on Mergers and Acquisitions Law for more articles on M&A deals and a directory of the leading lawyers in mergers and acquisitions.
Closing the deal and assistance during integration
If everything is in order, the acquiring company and the target company will now enter into a legally binding contract, which can be drafted with the help of M&A consultants.
However, their work may extend until post-merger integration is complete. Even when the documents look sound on paper, integrating the two companies often needs further work, with support from M&A lawyers.
Parties must also be cautious during the integration stage, since the success of the merged or acquired company will depend on how smooth this integration is.
What are the steps to hire a lawyer for M&A consulting?
Aside from being a part of the corporate team handling the M&A, lawyers are often central to effective M&A consulting. They are well-versed with Canadian competition law and the other related legal fields involved in M&As, which guides the whole process.
Here are the steps that a company—whether the buyer or the seller in the deal—can do when hiring a lawyer for M&A consulting:
- Define the deal and the lawyer's role: Since the role of an M&A lawyer can range very broadly, a company should start by being clear about the kind of legal support it needs. For instance, companies often bring advisers to do the M&A due diligence and everything else related to legal documentation
- Focus on M&A specialists: The company should also narrow the search to lawyers who specialize in M&A. It is often risky to hire a generalist or a lawyer from a different practice area, since they may not have the necessary expertise to guide clients through an M&A deal
- Check industry and M&A experience: Once the company has a short list of M&A specialists, the next step is to look closely at their sector and experience in M&A deals. It is also helpful to find someone who works within the same industry as the parties involved in the M&A transaction
- Review reputation and skills: The next step is to check reputation, by doing online searches and speaking with the lawyer's previous clients. Also, evaluating the lawyer's negotiation skills and soft skills is also a must, since these skills are very much needed in M&As.
- Ask about fee structure: Fee structure is another key filter. For example, you might move away from hourly billing, which can be more expensive, and instead use flat‑rate fees especially for a simpler M&A deal. However, the level of involvement and the lawyers' cost is always linked, since legal feels will vary with deal size and whether the buyer is a smaller company or a large corporation
When everything is set, it is important to sign an engagement letter that sets out when and how the M&A lawyer will be involved in the transaction.
M&A consulting: Choosing the right team for the deal
The most successful deals come from a focused team, including M&A lawyers, who understand markets and buyers. These professionals can help companies move through the M&A deal, from growth strategy and target screening through post‑closing integration. With their legal knowledge, an M&A transaction stands a much better chance of closing on fair terms and supporting long‑term business goals.
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