Mergers and Acquisitions – Assembling the Right Team

This story was originally published by Law360™ Canada, (www.law360.ca) a division of LexisNexis Canada.

By Charlie Kim, Matthew McGuigan, and Adin Fine

This article outlines: how to build that team, the key members involved, and the importance of effective communication among team members.  

Build the Team Early

A common mistake among owner-managers is waiting too long to engage professional advisors. Many assume the team can be built once a buyer has been identified or a letter of intent has been received. The opposite is true. Engaging an advisory team well before preliminary discussions with potential buyers is essential.

Ideally, preparation should begin as early as one to two years before a sale, however, even several months of advance preparation can significantly improve the process. During this period, the advisory team can conduct a proactive review of the business, identify issues affecting valuation or timing, and implement enhancement measures before buyers are engaged. This may include reviewing key contracts, updating employment agreements, organizing financial records, documenting intellectual property rights, and addressing operational weaknesses. Resolving these issues early reduces the risk of surprises during due diligence and preserves negotiating leverage.

Assembling the Team: Key Members

M&A Advisor
An M&A advisor plays a critical role in preparing the business for sale, generating buyer interest, and managing the transaction. Responsibilities typically include preparing and marketing the business, coordinating the valuation of the business, identifying and contacting potential buyers, coordinating the sale process, assisting and facilitating due diligence and financing, and, in tandem with M&A lawyers, negotiating transaction terms and closing the deal. Their specialized knowledge and experience are invaluable in maximizing value, maintaining momentum, and guiding the seller through the complex transaction process.

M&A Lawyer
Once legal documentation and due diligence get underway, an M&A lawyer assumes leadership of the process. Key aspects of the deal will flow through them, including coordinating workstreams, managing timelines, and driving the overall process to closing. Effective M&A lawyers are far more than just legal advisors; they are the central orchestrator of the transaction in its most critical stages, acting as the key negotiator, strategic advisor and primary risk manager. This includes: (i) drafting and negotiating the purchase and sale agreement; (ii) reviewing due diligence materials to identify issues that may affect value, liability, or closing; (iii) identifying risk; (iv) minimizing liability exposure; and (v) negotiating the key provisions that set forth the parties’ rights and obligations, including representations and warranties, covenants, closing conditions, purchase price adjustments and indemnities. A strong M&A lawyer is often the difference between a transaction that merely reaches closing and one that closes on terms that the owner-manager sets out to achieve.

Accountants and Tax Advisors
The financial and tax aspects of a sale often have the greatest impact on the seller’s net proceeds. An accountant can assist with financial due diligence, normalize financial statements, and help present the business clearly and effectively. Tax advisors, together with accountants, assess the most tax-efficient structure for the transaction. How a transaction is structured from a tax perspective can dramatically affect the after-tax proceeds an owner-manager ultimately receives. Engaging a tax advisor early can result in meaningful tax savings that more than justify their costs.

Key Internal Employees
While significant attention is often placed on external advisors, trusted internal employees are among the most overlooked resources already available. Key internal employees often possess institutional knowledge. Therefore, their involvement can significantly reduce the burden on both the owner-manager and the rest of the deal team during the process.

However, discretion is essential when involving internal employees. Only those whose participation is necessary should be included and the number of employees involved should be limited. Furthermore, the confidential nature of the transaction must be clearly communicated as broader disclosure within the organization introduces significant risks.

Teamwork and Communication

Clear Communication
Even the most experienced team will underperform if its members are not working in sync. Clear lines of communication between M&A advisors, M&A lawyers, accountants, and tax advisors are critical. Misalignment can delay transactions, result in conflicting advice, and increase costs.

At the outset, team members should be introduced to one another and provided with a clear understanding of roles, strategy, timeline, and key deal terms. Regular group check-ins can ensure alignment and consistency throughout the process.

Maintaining Confidentiality
Protecting confidential information is imperative throughout the sale process. Premature disclosure can create uncertainty among employees, customers, suppliers, and other stakeholders, potentially disrupting operations and undermining the value of the business. Accordingly, careful information management should remain a priority from the outset:

• Protect Internal Communications: All correspondence between the owner-manager and the advisory team should be conducted through the owner-manager’s personal email account. Business emails and their associated files may be stored on company servers that become accessible to a purchaser after closing. Communications with legal advisors are generally privileged and confidential but making them accessible to the purchaser can compromise that protection.
  
• Prevent Public Disclosure: Transaction-related materials should not be stored in shared drives or other locations accessible to employees who are not involved in the process. If employees discover the existence of the deal too early, they may begin exploring other opportunities, internal morale can decline, and day-to-day performance can suffer.
  
• Emphasize Confidentiality: Employees who are involved in the process should be clearly and formally apprised of the sensitivity of the information being shared with them.
  

Conclusion

Selling a business is a complex and demanding process. However, with the right team in place, what might otherwise be an overwhelming process can be transformed into a structured and manageable path toward a successful closing.

Matthew McGuigan is an Associate in the Business & Transactions Group at Robins Appleby LLP. He is an Ontario lawyer advising on mergers and acquisitions, debt financing, private capital markets, and shareholder and partnership arrangements in the Canadian, cross-border, and international context. With a dual JD/HBA from Western University and Ivey Business School, Matthew applies his business acumen to address his client's legal needs.

Adin Fine is a summer student.

At Robins Appleby, we have been providing legal advice for over 70 years to entrepreneurs, businesses, financial institutions, and foreign companies operating in Canada. Located in Toronto's financial district, our firm is trusted by clients to help solve critical, time-sensitive issues. We offer a wide range of legal services including business and transactions, affordable and social housing, litigation and dispute resolution, commercial real estate development, tax law, employment law, and estate planning.