Roxanna Devlin is a Nashville, Tennessee entrepreneur with a diverse professional background spanning real estate, law, and business leadership. As cofounder of The Med Stay, LLC, she provides specialized housing solutions for patients undergoing complex medical treatments, while also managing property operations and guest services. Roxanna Devlin’s experience as a Realtor with Keller Williams Realty involved overseeing transactions, reviewing contracts, and ensuring compliance with legal and regulatory standards. With a juris doctor from Duke University School of Law and prior experience as a senior vice president at UBS in New York City, she brings a strong understanding of legal frameworks and financial strategy, making her perspective especially relevant to the legal considerations involved in mergers and acquisitions.
Legal Considerations in Mergers and Acquisitions
Mergers and acquisitions (M&As) are strategic initiatives that reshape industries, enhance competitiveness, and drive growth. Mergers involve two businesses of similar size combining to operate as a single entity. Acquisitions, on the other hand, involve one large organization, known as the acquirer, outrightly purchasing another business (usually a small entity) referred to as the target. Despite being two different approaches, these two initiatives are similar in that they involve two or more entities combining.
M&As benefit organizations in many ways, including optimizing synergies, improving the workforce, diversifying an entity’s financials, and minimizing tax obligations. Despite these benefits, there are several legal matters that acquirers and targets should handle to mitigate legal risks and ensure a successful transaction.
One such issue is due diligence, which involves thoroughly evaluating the target company’s financial, legal, and operational aspects. Through this process, M&A attorneys help acquirers identify targets’ potential risks, liabilities, and opportunities, assisting them in determining accurate valuation and whether the target entities align with their strategic goals. Due diligence helps to avoid costly mistakes, such as overvaluation and unforeseen litigation, facilitating smooth negotiations and integration.
The preferred deal structure is another significant legal matter that acquirers should discuss during M&As. Deal structures define the transaction’s terms, and acquirers can choose stock, asset, or merger deals. In stock deals, buyers purchase target entities’ company shares, gaining control over assets and liabilities. Asset deals involve buying specific assets from a target company’s portfolio, allowing acquirers to choose those that do not have unwanted legal obligations.
Merger deals, on the other hand, involve combining the target and acquirer through statutory procedures or consolidation, allowing these entities to operate as one. Each deal structure has different tax implications, regulatory requirements, and integration processes. M&A attorneys should advise acquirers on the most suitable approach that best aligns with their strategic goals, and that can optimize financial outcomes.
Targets and acquirers should also discuss and document representations and warranties. These M&A components provide assurances about the target company’s conditions and representations. Representations are factual statements about the target entity’s status, including financial situation, compliance with laws, and asset ownership. Warranties, on the other hand, are assurances that the target company’s representations are accurate. Notably, warranties have provisions that mandate the target to offer remedies to the acquirer in case the representation is inaccurate. Properly crafted representations and warranties ensure a fair and transparent transaction, influencing the deal’s success and stability post-closing.
M&A law specialists should also ensure M&A transactions document non-competes and non-solicits. These are legal promises the targets make to acquirers that they will not engage in any competitive business that affects the buyers’ businesses. This means the targets’ employees and stakeholders cannot open similar entities, lure their previous employees from buyers, or collaborate with other players to compete with the acquirers in the future.
Target indemnification is an important clause in the closing stages of M&A transactions. This clause protects buyers from losses arising from covenant breaches by target entities. The indemnification ensures acquirers can claim compensation if the target’s actual situation differs from what was documented during the transaction. Inaccurate financial statements and undisclosed liabilities are common indemnifiable events in M&A transactions. Indemnification clauses annul transactions and mandate the target to pay the acquirer a specific amount until the value of the closing price is achieved.
Finally, closing conditions are specifications in M&As’ closing phases that detail specific conditions that must be met for the transactions to be completed. Most closing conditions’ requirements include shareholder approval, board approval, and the absence of material changes in the target company. Closing conditions protect both parties’ interests and mitigate risks.
About Roxanna Devlin
Roxanna Devlin is a Nashville, Tennessee based entrepreneur and cofounder of The Med Stay, LLC, where she oversees medical housing services and property operations. With a background in real estate at Keller Williams Realty, she managed transactions, contracts, and client negotiations. She also holds a juris doctor from Duke University School of Law and previously served as a senior vice president at UBS in New York City, focusing on law and investment banking.
