M&A from an Attorney's Point of View

M&A, Due Diligence, and Integration from an Attorney's Point of View

In this episode, Kison interviews mergers and acquisitions attorney Luke Fedlam, who shares his knowledge on working with and outside counsel, representing the seller, sending letters of intent, setting up a financial plan, and how to transaction showstoppers beforehand.

“When everybody's feeling that everything is happening behind closed doors, when employees don't feel like a part of the process, it can be though. But we're always there on site when the transaction closes so that we can have immediate conversations with the employees so that they are not hearing it from press releases or the news, that they are hearing it from us. Typically, we do that with the foreign owners.“

Luke Fedlam, whose experience includes working at a mid size law firm focusing on mergers and acquisitions where he was often representing the seller, was an in-house M&A attorney at Scotts Miracle-Gro, where they focused on strategic acquisitions.

He has had the opportunity to work on numerous deals of varying sizes and complexities as he advises his business counterparts and to execute their business vision.

He typically works with the business leads, the people who are going to take over the business that they acquire, as well as their deal leads, who are the people who are managing the actual transaction from a business perspective.

He mostly relies on the outside cancel for their legal advice and expertise in complex transactions.

His job is to be familiar with this business, so he can highlight to the outside council what their business objectives are so as to know what to plan for, watch out for, and strategize around.

The transactions that they deal with on an everyday basis have areas of interest around

  • environmental health and safety
  • regulatory
  • intellectual property
  • tax and employment issues

All which with the outside council helps advise.

Approach to Due Diligence

Because the target company wants to protect their information as much as possible, his approach to due diligence is having a little bit of financial diligence so as to put together complete and thoroughly written LOIs.

First they get the financial information for tax purposes and evaluation, then they send LOI and unleash the process of due diligence.

Between the biggest risks that can come across during a deal, Fedlam’s advice is to get as much information as possible through due diligence, in order to prevent new unknown  information from coming to light after the transaction is done.

Fedlam highlights the importance of having a diverse team that focuses on various issues, especially when it comes to intellectual property.

Many times, renegotiating terms will have to do with financial aspects.

After creating a letter of intent, you may find out the company’s numbers are not what you believed they were.

Then you will have to redo the financial plan, if you still want to do the transaction.

Being at a law firm, sometimes the buyers used their financial leverage negatively.

Luke's company chose to protect their relationship with the client and everything they have built.

He believes that the client should be proud after the transaction, feeling that they got a fair price.

Cultural Post-Merger Integration

On cultural integration, his piece of advice is to have people working on the integration process from the beginning.

"Your integration is as good as your due diligence is, and so the process really does start on the back of due diligence. Most law firms are quick to provide a due diligence request list that goes from the buyer to the seller of all the information that the buyer wants to have about a particular target. We have done enough transactions over the years that we have what I would describe as a "daunting request list" of information, a master list. There may be different 400 entries of what we're looking for, but what we do before we even move into the diligence phase is to have a kick off meeting where all of our functional areas will be represented and go through the transaction."

In order to grow a healthy relationship between the merging companies, Fedlam believes that transparency is critical.

He recommends to keep the local feeling, deliberately focusing on the employees and sharing what it's going to be like post closing of the transaction.

“When everybody's feeling that everything is happening behind closed doors, when employees don't feel like a part of the process, it can be though. But we're always there on site when the transaction closes so that we can have immediate conversations with the employees so that they are not hearing it from press releases or the news, that they are hearing it from us. Typically, we do that with the foreign owners.“

The biggest challenge would be making sure that the outgoing owner stay engaged in that transition.

They need their help making their messages and values are being communicated to the employees.

He has experienced transitions in which the previous owners have bailed out mentally, but during an acquisition, part of what you’re paying for is for their help while transitioning.

 

00.00 /  05.00 / help from the outside council

05.00 / due diligence and letters of intent, bankers

10.00 / 15.000 timeline and risks, showstoppers

15.00 / 20.00 renegotiating terms

20.00 / 25.00 renegotiation purchase price

25.00 / 30.00 financial leverage

30.00 / 35.00 integration process

35.00 / 40.00 cultural and transparency

40.00 / 47.00 outgoing owners and engagement, CEOS sabotaging transaction

By
Kison Patel

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