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  • January 14, 2022

    Acquisition Checklist: Include Outside Professionals for Success

    For lawyers handling business acquisitions and divestitures, turning for help to outside professionals can lessen any issues that may arise. Eric A. Johnson discusses the types of professionals that can help lawyers smooth out complicated transactions.

    Eric A. Johnson

    restaurant owner and team

    Practitioners in smaller communities or those working extensively with small business need not be intimidated when clients seek to buy or sell businesses.

    There are resources available to help lawyers better understand issues that could arise during any such transaction, and to better educate attorneys as to when to seek help.

    Smoothing Out Transactions

    Acquisitions are difficult for any size business, but they can be made smoother or made into bumpy rides depending on the outside advice obtained along the way.

    In most acquisition settings, a lawyer’s first instinct is to minimize the involvement of outside professionals in order to maintain the secrecy of the transaction. The more actively involved the nonlegal professionals are in any acquisition or divestiture, however, the more likely it is that the process will go more smoothly.

    Any attorney needs to meet the obligation of competence in order to assist in any business transaction (see SCR 20:1.1). But with the aid of outside professionals, practitioners can learn about potential issues, and better assess whether they feel confident of their abilities to help the business client.

    Getting input from the outside professionals early in the process will help smooth the transaction, and even better, help business clients to determine the best way (or even whether) to proceed.

    Employees: Key to Success

    Given that in most acquisitions, the employees are key to the transaction’s success (both the employees of the acquired entity as well as the employees of the acquirer), those things that are important to such employees should be handled clearly and well.

    Eric A. Johnson Eric A. Johnson, Mitchell Hamline 1994, is the in-house counsel for a group of family-owned companies in River Falls, where he specializes in herding cats.

    The first question employees involved in an acquisition ask is “What does this mean for my job?” And the very next question is “What does this mean for my benefits?”

    Answering those questions requires the involvement of the nonlegal professionals managing many of the relationships for most companies: the payroll providers, the medical and other benefit providers, the retirement plan provider, and the like.

    Payroll providers can provide a wealth of information, and most with any level of sophistication also have closing checklists applicable to the needs of payroll management. Does the acquired company have its own payroll provider? Is the acquired company in another state? Who will be responsible for ACA and other regulatory filings, post-closing? Is an employee union-involved?

    One of the most important things for any employee is getting paid on time and getting paid correctly. Involving the payroll provider early on in the acquisition process will help to alleviate many of those concerns.

    What about benefits? Does the acquired company offer any, and if so, to what extent? If you are the acquiror, what is your benefits provider willing to do to get the new employees covered? Are there any issues with open enrollment? Are there any strange things applicable to the geography of the acquired company which will then require additional scrutiny or creative solutions – such as: Is the company outside the U.S.? In a provider/clinician dead zone? Are there only limited insurers willing to cover the market area?).

    If your client is in need of creative solutions, you will need to get your client’s benefits provider in the loop early, so that they can help the practitioner help the buyer make the employees more at ease.

    As to retirement plan providers, there are myriad regulatory obligations that need to be met for all companies. But in an acquisition setting, it is best that such plan providers are involved early, and that contingencies are put together for transfer or roll-over of existing plan assets. Many issues arise when addressing retirement plans, so the best way to ensure compliance is to work with the professionals who specialize in this area. Lawyers should not rely on them, but their guidance should help narrow the issues and provide an understanding of the requirements of this highly regulated employee benefit.

    The key here is that these issues – payroll, benefits, retirement plans – are all highly regulated, and it is difficult for practitioners to know all of the issues associated with each of these practice areas. Outside experts in these fields help to let the lawyer know what issues will or may arise, allowing the lawyer to better help the client get done what needs to get done.

    Use Outside Resources for All Phases of the Transaction

    Additional areas of concern where outside professionals can help are accountants, insurers, and information technology (IT) professionals. Accounting firms are frequently key contributors to any acquisition, both as to valuation of the target company but also as to the form of the transaction (asset versus stock, for instance). Also, integration of insurance and IT systems can be a tremendous cost savings opportunity for the acquiror, but also needs to be handled properly to avoid coverage and system gaps.

    Issues can arise at any time, however, and lawyers need to be aware that deals may fall apart at the eleventh hour. But having the proper guidance in place helps ensure that, regardless of the success of the deal, those things left to human foibles are minimized.

    These professionals – accounting, payroll, benefits, retirement planning, IT, and insurance – can also provide post-closing guidance to both the seller of the business and to the ongoing business as it moves forward. Thus, getting them involved at the start of the deal helps make sure most issues are addressed prior to closing.

    In sum, using available outside professionals helps the practitioner be a more effective partner to both the selling and the surviving business.

    Need More Info on Acquisitions?

    Whether your business clients want to increase their enterprises through acquisitions, merger, or stock sales, be prepared to advise them with help from Securities, Mergers and Acquisitions in Wisconsin from State Bar of Wisconsin PINNACLE®.

    You'll find relevant case law and time-saving checklists, cautions, caveats, sample language, and practice tips. Citation is easy with a table of cases, a table of statutes, regulations, and rules, plus a complete index.

    For more information, check out the book's Table of Contents and visit WisBar's Marketplace.

    This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.

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