Lawyers
There are many areas of a business that are governed by different legislation. For example, the employees and their contracts of employment will be governed by employment law, the intellectual property rights owned by the business will be subject to intellectual property law and the real estate owned by the company will be subject to property law. As a corporate lawyer you are expected to have a grounding in these areas but you cannot possibly have a detailed knowledge of every area of law.
As a result of this it is common for transactional lawyers to have assistance from other lawyers in the firm specialising in different areas of law. This is known as corporate support.
Corporate support will be particularly useful when conducting due diligence and considering appropriate warranties and indemnities. Transactional lawyers are required to act as both a facilitator and also an organiser. You may be required by your client to report back to him on all of the areas that your colleagues are working on, unless there is a direct line of communication between your client and the specialist lawyers themselves. The most difficult task that a transactional lawyer often undertakes is keeping up with all of the issues across the different areas of the deal and ensuring that all of the relevant issues have been addressed in the documentation.
(Note: the target may have overseas operations, in which case overseas counsel will also need to be instructed. These lawyers may assist with matters such as undertaking due diligence on aspects of the target’s business which are governed by foreign law or regulation, drafting or reviewing warranties and indemnities concerning the overseas aspects, and arranging and overseeing any completion or post-completion requirements which need to take place in their jurisdictions, such as local registration of IP rights.)
Accountants
Transactional lawyers also need to work closely with the client’s accountants. As well as carrying out financial, accounting and tax due diligence, the accountants will probably dictate to a large extent the structure of the deal (which will often be tax driven) and this is why a good grounding in basic accounting and tax principles is crucial.
If the parties have agreed that the terms of the acquisition will include an earn out (a type of deferred consideration), or if the price is to be based on completion accounts, accountants will also advise the parties on the basis on which the earn out will be calculated or on which the completion accounts will be drawn up.
Business strategy
In order for you to provide the best possible legal advice to your client whether as buyer or seller and to enable you to negotiate the best possible deal it will be important for you to have some idea of your client’s business strategy. If your client is the seller, why is it selling? If it is the buyer how does it envisage that the acquired business will fit into its existing business?
You need to make sure that you are aware of your client’s objectives for buying and selling and this will involve you trying to establish a basic understanding of your client’s business and the market that your client’s business operates in.
There are many reasons why a client may choose to sell a company or business. These may include:
Commercial reasons where the business cannot keep up with the latest developments in the market in its current format. For example, a telecoms business that cannot afford to invest in new technology and cannot raise finance. In this situation the best option may be for the business to be purchased by a larger company in the same industry that will have money to invest in the technology;
Non-commercial reasons such as the illness or retirement of the individual owners. Non-commercial reasons can also include a lack of interest by business owners (for example where a business is inherited) or the inability of an owner of retirement age to find a successor; and/or
Financial reasons where the business needs to raise finance in order to avoid the failure of either part or all of its business.
Whatever the reason, as a transactional lawyer one of the most important parts of your job will be to understand your client’s business objectives and to ensure that the deal is structured in order to ensure that these objectives are met.