Our San Diego mergers and acquisitions lawyers increase success rates of our client’s acquisitions. Research varies from one source to another, but regardless of the source studies have shown 60 to 85 percent of mergers fail in the United States. Some of the theories behind a failed merger include poor due diligence, momentum, debt and post-merger possibilities. Why is the failure rate so high in most cases, and how can the Watkins Firm increase the odds of success in your merger or acquisition?
3 Key Takeaways About How Our San Diego Mergers and Acquisitions Lawyers Increase Success:
- According to the Harvard Business Review more than 70% (and closer to 90%) of all business mergers and acquisitions fail.
- The failure to conduct thorough due diligence, and the inability to merge differing corporate cultures are the major reasons many mergers fail.
- Watkins Firm’s success rate is almost the inversion of the above statistics. Why do the majority of our M & A transactions succeed? Why are do our M & A clients highly recommend the Watkins Firm? 40+ years of proven, successful experience, legal skill, and “can do, lets get it done” deal making mentality.
Failure to Conduct Proper Due Diligence is a Primary Reason Mergers Fail
The failure to conduct proper due diligence in an asset purchase or stock purchase transaction is one reason mergers fail in San Diego and throughout California. Mergers and acquisitions are not simply big words; they are sophisticated legally and financially complex deals that involve extensive preparation, long negotiations and detailed contracts covering everything from executive control to third-party interactions. Having the right professionals on your side can literally make or break the deal.
Success often comes down to the nitty-gritty details, according to most analysts. Due diligence is a part of every mergers and acquisitions transaction. In the broadest sense, the term means that there is a duty to investigate before making a deal or signing a contract. One problem with some mergers is that the “investigation” or “due diligence” is not done properly whether that means that it was not thorough enough or that there was a problem with the person conducting it.
The Watkins Firm has developed our own proprietary due diligence processes and checklists with a proven track record of success over our 40+ years of successful M & A work. We work with our clients to verify every disclosure, warranty or representation. We analyze all assets included in the transaction and associated encumbrances. We evaluate current market trends as well as the likelihood of successful transition of “goodwill” from the seller to the buyer. Our San Diego mergers and acquisitions lawyers increase success rates of our client’s acquisitions.
Integrating Cultures and Debt Are Additional Potential Red Flags
Integrating the operational business cultures of the buyer and the acquisition target and the structuring of debt will play a substantial role in a successful merger or acquisition. How can the advice and counsel of the Watkins Firm help you to evaluate these risks and develop strategies to increase the odds of a successful transition?
“We’ve Come Too Far to Back Away”
Some people are afraid to say what they really think once a deal is underway. These complex and expensive transactions require a lot of skin in the game for all parties in terms of time and money. It can be difficult for some people to keep the process from moving forward after all they’ve invested to set up the transaction.
Your Watkins Firm attorney provides clear, accurate insight and analysis. In some cases it may be better to back away from the transaction. In most cases where genuine concerns arise out of due diligence we help our clients to establish controls, additional terms and conditions and strategies to reduce risk and increase the odds of success.
Pro-Tip: “Well, when you have a corporation for a long time, it becomes another person, a citizen, and you get credit for that corporation that corporation can sign leases, that corporation can sign vendor contracts, it can get licenses, it can do all kinds of things that have built up over the years. Whereas if you have a brand new company, you’re guaranteeing everything. So if you want to buy a company that’s already running, you don’t have to renegotiate everything and you just come over with a good shareholder agreement and a stock purchase. You can step into the shoes of a very successful company and just hope it makes a profit.
The advantage to the buyers in a stock purchase transaction is they are stepping into the shoes of the seller. Sellers have tax advantages in selling stock. That’s always good because a stock sale on something you’ve held for a long time, it’s going to be taxed at a better rate. Also it’s a cleaner transaction. You just sell the stock, there’s still going to be due diligence and you still have to make representations and warranties about the company. So it’s still going to be your liability if you’re not honest and truthful, but you definitely would prefer to do a stock sale.
What are some of the effective strategies? You might request a holdover, having people work across the transition. There’s always something. And as a deal maker, that’s what a transaction lawyer is. You want to come up with creative ways to get the deal done while certain contingencies wait. We have had money and trust accounts on deals for two years while a contingency is fulfilled by the seller. So you’ll pay 2 million for a project and there’s $200,000 coming to the company, but it’s not going to come for a while. So the seller will say, well, let’s keep the $200,000 for me in escrow until the company I’m selling gets that $200,000 and we get the deal done. Again, getting what you’re paying for, knowing that you’re getting full disclosure, Goodwill. The risk – people taking off and forming another company and competing with you, and also not having the expertise that the seller has. So, full disclosure and expertise. Those are probably the key things we see in whether companies we acquire are successful.” – Dan Watkins, Founding Partner
Our San Diego Mergers and Acquisitions Attorneys Increase Success for Our Client’s Acquisitions
How do our San Diego mergers and acquisitions lawyers increase success for our client’s acquisitions? In addition to thorough due diligence, we give extensive thought and analysis to post-merger scenarios. What is actually going to happen after the deal and how can the protection of key employees, a transition management strategy and key customer relations impact the transaction going forward?
Your Watkins Firm attorney will not only ensure that the details are taken care of, but that they are clearly communicated to those involved. We provide sound advice and counsel based upon almost four decades of proven and successful experience. We ensure thorough due diligence and attention to the details which can make the difference between failure and a successful acquisition.
If you would like to learn more about how you can ensure the success of your San Diego or California merger or acquisition we invite you to review our podcast Episode 13 – Mergers and Acquisitions as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
Meet Daniel Watkins:
Daniel W. Watkins is a true people person who sincerely listens. He cares deeply about what others are going through. Dan enjoys digging into the facts and finding creative solutions to problems. He contributes his insights candidly and constructively.
Dan’s interest in people make him deeply invested in every relationship and his exuberant personality makes him a true litigator. Dan fights for his clients with a fierce and calculated commitment.
Dan has practiced in the areas of business, medical practices and healthcare business, high tech/science, real estate and employment defense law since 1987. He is a trusted litigation strategist and true trial attorney with over 50 jury and bench trials to his credit. Dan has successfully represented both large companies and individuals and achieved substantial victories in well-publicized trials throughout California and the U.S.
He is experienced in business and corporate formation and administration, as well as all forms of alternative dispute resolution, including binding arbitration and mediation.
THE ROAD TO BECOMING A BUSINESS LAWYER AND LITIGATOR
Dan has almost 40 years of experience working with, for and against some of the largest insurance companies in the country. He has successfully tried and litigated cases in the areas of Healthcare Compliance, Commercial Litigation, Unfair Business Practices, Fraud, Breach of Contract, Battery, Premises Liability, Product Defect, Medical Malpractice, Discrimination, Sexual Harassment, Construction Defect, as well as Unfair Competition, Defamation, and Trade Secrets.
In December 2003, Dan commenced litigation against Health South Surgery Centers-West, Inc and its’ subsidiaries, exposing the company’s extensive mismanagement and misconduct of its’ surgery centers. Dan has also been asked by some of California’s largest municipalities and corporations to conduct legally required investigations into matters involving alleged employment discrimination and harassment.
