Merger & Acquisition

Merger and Acquisition

Mergers and acquisitions take place when two companies turn into a single entity and the merger company gets a fresh identity. No company can make a fresh investment during the Procedure of M&A, although exchange of shares can occur during this procedure. There is a buyer company that lasts and the seller company no longer exists. India is fast becoming one of the favourable hubs for investors, industries, big companies that find this destination as more flourishing than others. Due to high returns on shareholders and capital investment, the prospects of mergers and acquisitions is dramatically increasing in this country. At SPD Consulting Services Pvt Ltd, we have an expert team of financial professionals and lawyers dealing with every aspect of merger and acquisition.

Due Diligence before M&A

At SPD Consulting Services Pvt Ltd, we have a team of technical experts specialising in due diligence. Our approach is flexible and methods of due diligence proactive to customise the solutions, so that the risks can be eliminated from the deal, making it valuable outright. Read the following to learn more about our due diligence techniques.

• We consider due diligence work beyond the deals we facilitate.
• Each project of due diligence we handle undergoes proper planning to ensure that all the vital components from valuation, risk areas, and drivers are properly assessed.
• The flexible approach of our team allows us to meet the highest levels of expertise that the clients desire for the project.
• We have a team of professionals who are committed to look into the requirements of the clients and possess the skills needed to deal with sudden and unexpected occurrences that can impede the transaction and finds the best solutions.
• We partner with the clients to figure out the risks involved in the transaction and assist them to take calculated decisions that customise our suggestions on the challenges associated with every deal.
• The team involved in due diligence have technical expertise and knowledge of sectors to carry out due diligence with ease.
• The experience of operation and a wealth of knowledge in different industries help us perform due diligence in-depth.

Accessible Solution

We are happy to provide accessible solutions to businesses that can be personalized to reduce the complexities in the deals. The goal of your company is to focus on the highest quality of services and responsiveness to deliver affordable solutions that resonate with the best practices in the industry. The following is our approach of due diligence work.

• Finding out the sustainability of income and comprehending the key business factors.
• Determining the cash outflows
• Normalising the working capital for certain items
• Providing a report of major exposures
• Evaluating the claims and areas of risk

Financial and due diligence team can offer you following services.

• Due diligence services that are associated with the private equity firms for evaluation of an investment in the prospective company.
• Approach of Due diligence, which is independent and flexible involving the views of the management and various opinions on different issues thereby helping the prospective buyer to make a calculated decisions.
• Due diligence services related to the requirements of corporate entities as buyers.
• Figuring out the potential hindrances when exiting the deal and addressing those issues that can affect the value of the deal during the initial stage to take the right decision to rectify them.

Whether we are with the purchaser or seller side, our professions performing due diligence have the knowledge and experience to facilitate the work of analysing the deal, based on the size of the target in different markets and across the geographical boundaries.

Due diligence for buyers in M&A

At SPD Consulting Services Pvt Ltd we provide M&A services while performing due diligence for buyers. Read the following to know what happens in different stages.

Process and negotiation phase

• During this phase, our experts work on-site and off-site
• We offer a wide range of flexible approaches even after the initiation of the project.
• Conducting question and answer process with the management.
• Reporting the draft including the assistance the purchaser requires about financial aggregates and dealing with financial clauses.
• Support required for preparation of the terms of negotiation
• Updating the client regularly

Closing process and post-closing assistance

• During the closing and post-closing period, we prepare a review of closing documents that the target company prepares.
• Reviewing the transaction during the post-closure stage
• Making the necessary adjustment in prices based on the findings of due diligence.

Acquisition due diligence

We offer the following services during acquisition due diligence

• Analysing or figuring out the primary elements affecting the price of acquisition.
• Identifying in-depth the risks for which requirements of warranties are essential.
• Finding normalised profits, net debt, and working capital.
• Determining the standard acquisition structure from the viewpoint of tax and finance.
• Assessing the quality of earnings of the target.
• Performing audit during the post-acquisition stage and the preparation of opening balance sheet.
• Providing the necessary assistance with drafting of methods related to making price adjustments.
• Finding the reasons for below performance of the target.

Vendor due diligence

For vendor-side due diligence, you can go through our solutions.

• Preparing the format of financials
• Figuring out the factors that affect the ranking and value generation.
• Assessing the historical performance of the company for the preparation of crucial review and drafting the business plan.

Once our team completes the due diligence work, we move on to the next stage of transaction.

Corporate structure and general matters

The legal team at SPD Consulting Services Private Ltd reviews the corporate structure, documents of the organisation, capitalization, and general records of the company to ensure that everything is in order. The following are a few documents we generally review at this stage.

• Documents of incorporation
• Chart of the organisation
• Bylaws for corporate entities
• Plans and agreements related to stock option
• List of security holders
• Stockholders and the agreements of voting
• Warranties
• Documents related to the restructuring of business and recapitalisation
• Minutes of meetings of executive committees, shareholders, and board members.
• Plans of stock appreciation rights and the grants associated with them.
• All the agreements related to the sales and purchase of the business.

Our team of corporate attorneys inspect all the financial information of the company of the last five years, such as the balance sheets, income statements, audit reports, and cash flows. Besides this, we also review other financial documents, such as budgets and forecasts, financial projections for the next few years to determine the true logic of carrying out the transaction. Finally, they also review the documents of debt, credit agreements, and liabilities of contingents.

Taxes

The transaction tax experts can comprehend the requirements of business and understand your requirements to provide tax solution in M&A deals. Tax due diligence is one of the significant aspects that we consider for exploring historical liabilities of income tax and provides an analysis or explanation of the amount of tax as carry forwards from the past along with their prospective benefits. The corporate tax layers of our team also verify that the taxes in different jurisdictions are not old to avoid tax issues.

• Acquisition and merger or any other form of capital restructuring.
• Acquisition of Distress Assets and entities that come under the coverage of IBC 2016.
• The federal, local, state, and foreign income, tax returns, and sales.
• Audit reports of governments
• Notice or correspondence the companies receive from local, state, foreign, and federal authorities.
• Settlement documents with the tax authorities
• Transfer prising and tax sharing documents.
• Carry forwards of credit and total losses incurred during operation.

Strategic Fit

Embarking on a different route is one of the basic strategies of foreign investors. Figuring a suitable target is one of the key aspects and significant to make the acquisition successful. We assist companies looking forward to favourable M&A deals, which provide the potential cooperation and are considered the right fit. At SPD Consulting Services Pvt Ltd, we focus on a network of positive relationships and find those deals that can be of significant interest to the buyer, and then zeroes down the targets, keeping in mind the long-term goals of the purchaser.

In Merger and Acquisition deals, the aspects of strategic fit and future performance are as significant as the present prospects of profit. As a prospective buyer, one of the primary aspects of due diligence is to explore whether the company is a strategic fit within the present structure of the business. Besides this, the parties involved in the deal also need to determine how they will work in the future. Some of the considerations in this regard are as follows:

• Marginal costs
• Human resources
• Technology
• Transition and integration
• Work culture of the companies

The successful purchasers in mergers and acquisitions deals try to boost their capability systems and leverage those systems. At SPD Consulting Services Pvt Ltd, we ensure that strategic fit among businesses that relate with each other offer the potential of competitive benefits in terms of the transfer of key skills and affordability, managerial and technical knowledge. The opinion of our experts allow the parties involved in the deal understand whether entering the deal fits into the option strategically.

Intellectual Property

The intellectual property lawyer in our team of professional experts can assist in determining the quality and extent of the intellectual property and technology. With the expert legal team, a following aspects of the company are to be reviewed to protect them before acquisitions.

• Copyrights
• Domain names
• Trade secrets
• Patents
• License and licensing agreements
• Trademarks
• Hindrances or liens in the intellectual property
• IP litigation and claims
• Copies of all the material agreements for licensing the company technology from and to third parties.
• Correspondence from third party about the prospective infringement of intellectual property of others.
• Descriptions of the existing patents to find out their significance.
• Getting the details of the law firm that deals with the issues of patents and trademark of the company.
• List of proprietary processes controlled by the company
• List of all domestic and foreign patents and trademarks held by the company
• Trade names, trademarks, or service marks

Our experts study the prospects of intellectual property in depth before moving ahead with the deal.

Material Assets

Among the material assets of the company that can impact the deal are listed below. We consider the total value of the assets, along with the liabilities or debts against them. Our team has the expertise and knowledge to appraise the following assets.

• Real estate
• Technology and equipment
• Stock in the inventory
• Research and development
• List of material and real personal property to which the company is a lessor or lessee.
• List of security interests related to the personal property
• The outstanding leases of personal and real properties
• Documents containing disposition of assets and important acquisitions
• Titles, deeds of trust, mortgages, and security agreements related to the properties

Contracts

At SPD Consulting Services Pvt Ltd, the corporate lawyers review the commitments and contracts of the target company and spend enough time on each aspect to rule out the errors. The following are the documents that our legal team reviews.

• Schedule of accounts payable and receivable
• Agreements of joint venture and partnerships
• Contracts of customers and suppliers
• Credit agreements and loans
• Leases of equipment
• Exclusivity agreements, exploring the favoured country, and non-compete
• Advertising, distribution, sales, and dealer agreements
• Employment contracts
• Licensing and franchising agreements
• Leases of real and personal property
• Evidence of outstanding loans or guarantee by the company
• Sales and manufacturing contracts
• Retirement, bonus, pension, profit sharing, and deferred compensations plans along with agreements of management incentives.
• Form of employee confidentiality along with invention assignment agreement
• Schedule of all insurance policies that are current and covers the property of the company, any other insurance policy, and policies of product liability.

Employees And Management

At SPD Consulting Services Pvt Ltd, we try to assess whether the employees are one of the most significant resources in Merger and Acquisition deal. It helps in interpreting the structure of the company management and the employee base. Usually, our legal team reviews all the necessary documents.

• Description of union activities or labour problems within the company
• Number of broken down employees by other major employees and the management organisation chart.
• Detailed resumes of top management executives and the directors
• Copies of questionnaires of directors and officers
• Compensation paid to directors, officers, and the key employees in the current financial year.
• Agreements of founders, management employees, and indemnification
• Loan and other agreements with officers and directors
• Copies of transactions between the company and an insider
• Retirement, bonus, pension, profit sharing, and deferred compensations plans along with agreements of management incentives

Litigation

For companies entering M&A deal, it is essential to know the legal implications and liabilities. Our lawyers review any pending litigations case, threatening or settled litigation, regulatory procedures and arbitration involving the target company. The following are the documents we need to inspect.

• Active litigation files
• Orders, judgments, decrees, involving the government agencies and courts.
• Information related to material litigation in which the company has a role or there are chances of involvement.
• Documents of litigation settlements
• List of dissatisfied judgments
• Documents related to injunctions and settlements

Compliance and regulatory matters of M&A

The lawyers of SPD Consulting Services Pvt Ltd review the compliance and regulatory issues involving the target company and the entire deal. The following are the list of documents to review.

• Potential issues of antitrust due to a purchase
• List of the department of commerce filings
• Previous regulatory or an antitrust issues
• Issues related to foreign investment.

At SPD Consulting Services Pvt Ltd, we assist companies to deal with different types of mergers. Mentioned below are a few merger deals we support for our clients.

Horizontal merger

This is a merger between companies that compete with each other directly whether in terms of product lines and markets. The primary goal of this merger is to increase cost savings, market share and explore new market avenues.

Vertical merger

In this merger between two companies operating along the supply chain, there is an amalgamation of companies, along the distribution process of the business. It is diametrically opposite to horizontal merger and the logic behind this is including better quality control, flow of information along the lines of supply chain, and merger cooperation.

Conglomerate merger

This merger deal is between companies that are not related to each other, and a mixed conglomerate merger includes two companies that are looking forward to product line expansion or target markets.

Product extension merger

In this merger deal, both companies sell products or services that are related to each other and ply in the same market. With this deal, the merged company can assemble the products together and enhance the markets and consumers. It is essential to note that the products and services of companies are not the same, but related. However, both companies can utilise similar channels of distribution, related or common processes of production, and supply chain.

Market extension merger

This is a merger between two companies selling similar products and services but play in different markets. The primary objective of this merger is to increase accessibility to larger markets to gain a bigger base of clients or target audience.

Pure conglomerate merger

In this merger deal, both companies are not related to each other and operate in varied markets. One of the risks of this merger is the change in operation due to the companies operating in different markets and offering products and services that are not related to each other.