While mergers or sell-offs of larger businesses often make industry journals or even national news, smaller acquisitions of businesses happen in the Indianapolis area and elsewhere all the time.
There is no universal right time for a business to buy another business, merge or enter a different type of arrangement with another organization. The best decision depends on the needs of the business and opportunities available to it.
Even if they are too small to attract the attention of federal and state regulators, mergers and acquisitions are complicated legal matters from the moment an Indiana business decides it wants to expand.
- The business must identify another organization it wants to acquire. Sometimes, all or part of that organization’s leadership might not want the acquisition. Either way, identifying an organization involves understanding that organization’s legal assets and liabilities just as much as their finances.
- The business will need to decide how to structure the deal and prepare the necessary buy-sell agreements. On a related point, financing the sale may require legal review of loan or other documents.
- The business may require a restructuring of its operating agreement and may even wish to choose a different organization structure. For example, an LLC that just acquired another business may want to incorporate. In a true merger, the two organizations merging may form a different, third business with a separate name and entity type.
- How to handle the acquired business’s proprietors, shareholders and key employees will also require attention to legal detail. For that matter, mergers and acquisitions almost always raise employment issues across the board.
- On a related note, the business will want some measure of confidentiality and assurances that key employees and proprietors will not use their knowledge and experience to open up a competing business.
- Acquisitions will also involve legally transferring the property of the sold business to the new business. This process may include the legal transfer of commercial real estate.
- There are other issues that can affect a merger or acquisition. Even with the best of care, a dispute and even litigation is always possible, and the expanding business may need to protect their interests in court.
The success of an acquisition or merger often depends on knowing one’s options
When the legal details do not get overlooked, an Indiana business can profit greatly by buying another business or merging its operations with another organization.
On the other hand, missing important details can derail a deal or, worse, put a business organization in a less favorable position than before they even considered expanding.
An Indiana business considering an expansion should make sure they understand their legal options thoroughly.
