3 Common Legal Mistakes Companies Make During Mergers And Acquisitions

Articles Tagged with: Mobile Business Lawyer

3 Common Legal Mistakes Companies Make During Mergers and Acquisitions

Mergers and acquisitions are a normal part of business, and companies choose to merge with others in order to grow and be profitable. In fact, the process is so effective that 1.46 trillion USD was spent on mergers and acquisitions in 2017, an impressive number but just a shadow of 2015’s value, which hovered, right around 3.8 trillion. Some companies choose to merge with others in order to expand their market reach, while others wish to grow their customer base. Larger corporations may acquire smaller ones in order to eliminate competitors, while others may do so to leverage economies of scale. While the ultimate goal is to increase profits, there are common mistakes companies can make that may lead to the exact opposite: profit loss. In this post, our Mobile business litigation attorneys discuss common critical mistakes business makes during mergers and acquisitions and steps they can take to help the transaction go more smoothly.

Failure to Perform Due Diligence

You would not hire an employee, make a large purchase, or make a critical business decision without first performing the necessary research and envisioning the overall “big picture” of said decision, so why would you acquire a company without first understanding all that there is to know about it beforehand? Before you purchase a business, you should understand everything there is to know about it, such as what is owned, borrowed, or leased, the nature of its financial standing, what liabilities and assets it owns, whether or not it is party to any material contracts, whether or not it has any intellectual property you should know about, and much more. An experienced Mobile business litigation attorney can help you perform your due diligence and ensure that when you do decide to purchase a business, you are not in for any rude surprises.

Failure to Establish a Seller Non-Compete Agreement

One of the most devastating mistakes you can make when purchasing a business is failing to establish a non-compete agreement. Without a legally-sound non-compete agreement, there is nothing stopping the seller from opening up shop around the corner from you. Because of the owner’s ties to the community, there is a good chance that his or her new business will see rapid success while your acquired business sees a significant decline in regular sales. Do not fall victim to this sort of scam and work with a knowledgeable contract lawyer who understands Alabama non-compete laws and who can help you draft an enforceable restrictive covenant that will protect your business for a specified duration and within a set geographical scope.

Failure to Establish a Favorable Purchase Contract

As a party to the acquisition, you may understand exactly what type of outcome you hope to achieve from the agreement, but do you have an idea of the type of outcome you do not want? For instance, you may acquire a company because it holds the patent to a highly successful design formula. However, once the deal is done, you discover that the business owner is not required to disclose the formula, and that you are liable for any outstanding debts that the company acquired. To prevent an undesirable outcome, work with a business attorney who can help you draft a favorable sale agreement that outlines who is responsible for what and which party gets to walk away with what assets, including real estate, intellectual property, and trademarks. Accompanying the purchase of a sales agreement should be any essential documents such as deeds, a copy of the office lease, copies of employee contracts, an inventory of assets, and more.

Retain the Help of a Knowledgeable Mobile Business Lawyer

At Cloud Willis & Ellis, our attorneys are familiar with the common pitfalls of mergers and acquisitions and are available to help businesses in the Mobile, Birmingham, and Hoover areas properly address those pitfalls so that they can avoid them. If you are interested in merging with or acquiring a business, do not set anything in stone until you have spoken with a lawyer. Even if you have already drafted an agreement, an attorney can review it in detail and ensure that every aspect of it is fair and serves to advance your bottom line.

Resource:

al.com/business/index.ssf/2015/06/alabamas_new_and_improved_non-.html

Commerce Law Lands Alabama Shop in Hot Water

While businesses in Alabama well know that they must contend with state laws, they aren’t the only ones that matter. One local Mobile business is learning that the hard way amid allegations that it violated the Endangered Species Act as per interstate commerce laws. The transaction in question may appear an innocuous oversight to some, but it echoes the environmentally sensitive agendas of animal rights activists and those otherwise concerned about the integrity of the ecosphere.

The consignment shop—Hertha’s Second Edition—was charged for having sold a jaguar fur coat to an individual located in Biloxi, Mississippi. And that’s a problem insofar as the panther onca is an endangered species protected by federal law. Defense of the sale includes suggestion that the cost at stake was actually produced prior the 1973 enactment of the Endangered Species Act and ergo subject to grandfathered permission. Attorney Jeff Deen also anecdotally appealed to what “The Andy Griffith Show” might have counseled.

Arguing that the complaint had gone too far—per Alabama.com—Deen argued that, “Andy or Barney probably would have come in and quietly mentioned, ‘Now, you know you can’t sell that across state lines, right?’ And that would have been the end of it.”

Instead, attention has been drawn to an affair that may well expose an employee’s naivety more than any deliberate nefarity. Nevertheless, owner Hertha Green’s business could be liable for a penalty worth up to $100,000. That’s no small change for a small business with just three storefronts.

Why Interstate Commerce Laws Matter

Some local businesses may be unfamiliar with what federal laws mandate. Originally enacted on behalf of coordinating railroad rates, the 1887 Interstate Commerce Act was a consequence of protest by small businesses and farmers who rejected price gouging by more powerful corporations. Amid said pressure, Congress was initially reluctant to become involved with the private sector. But the continued emergence of industry and potential costs entailed thereby required eventual consideration.

Whilst initially used to remove barriers that would otherwise hinder trade between states, the radical change undergone by local and national economies has ushered in ever newer applications. Today, legislators can now adopt the law as basis for increasingly broad powers over what the average business can do. Some decry said regulation as red tape, but others regularly champion in the name of progress and fairness. However one views federal laws philosophically, any company that does business across Alabama borders should be familiar with relevant legislation and how to remain on the right side thereof.

Getting the Right Help When Doing Interstate Business

Whether seeking clarification with respect to state or federal laws, Cloud Willis & Ellis in Mobile can advise or represent you while assuring you the kind of confidence your company deserves. Our pedigree and prowess as experienced attorneys means that nothing will be left to chance nor short cut. Our wide-ranging experience in corporate law includes years of experience and satisfied clients.

Resources:

al.com/news/index.ssf/2017/08/mobile_attorney_federal_case_o.html

senate.gov/artandhistory/history/minute/Interstate_Commerce_Act_Is_Passed.htm

Starting Out On Your Own?

Starting a business is an exciting adventure, but can quickly become stressful when you begin to learn about all the different components of the start-up process that must be considered. Especially for new small business owners with limited experience on the legal side of the process, the task list associated with starting a business in Alabama can seem overwhelming. Between tax registrations, obtaining business licenses, and investigating the need for local permits and how to obtain them, the process can be daunting. After the initial start-up process, the task list continues with tax withholding, hiring, documentation, and insurance processes. One of the first steps, however, is choosing which type of business entity you wish to establish.

Starting Out Small

There are a number of different business entity types available to choose from. Each one has its own potential advantages and disadvantages, and what is right for one type of business may not be right for another. The sole proprietorship is the simplest type of business entity. With this type of business, one person owns and manages the business. They alone are solely responsible for all of the transactions, including tax payments, as well as the debts and liabilities of the business. The owner is free to sell the business whenever they want to or they could pass it along to an heir. Paperwork and formalities are not as extensive for a sole proprietorship as with other types of business entities, but sole proprietors do need to comply with all licensing and local permit issues in the locality of the business. One of the more attractive advantages of a sole proprietorship is that they are the easiest and fastest type of business entities to start up.

Making A Name For Yourself

Some sole proprietors just use their own name for their business, but others may want to conduct their business under a fictitious name or ‘doing business as’ – commonly referred to as ‘DBA.’ In Alabama, if you want to use anything other than your own personal name for your business, you must register for a trade name. It is important to note, however, that even if a sole proprietor chooses to use another name for the business other than their own, the structure itself is not changed and all of the responsibilities and liabilities still remain with the business owner.

Starting Out Right – Contact Cloud Willis & Ellis, LLC For All Your Business Attorney Needs

Whether you are just starting out with a new business or you already have an established company, you will likely have a need for legal work at some point. Particularly when starting a new business, you want to make sure you get things started off on the right foot. The office of Cloud Willis & Ellis, LLC is the place to turn for professional legal guidance and representation. Our experienced attorneys have assisted countless Alabama businesses of all sizes with their legal issues of all types. Contact the office of Cloud Willis & Ellis, LLC today to schedule a time to meet with our legal professionals and learn how we can help your business with all of its legal needs.

Resource:

sba.com/alabama/

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