Nevada Mergers & Acquisitions
Are you considering a merger or acquisition for your Las Vegas area business? Mergers and acquisitions are exciting options that can often add immediate value to your business. But they should involve careful consideration and a solid plan to ensure they advance your business goals now and in the future.
Most of us have a general idea of how mergers and acquisitions work. They can be complicated, however. You should have a thorough understanding of the steps and legal requirements, as well as the pros and cons of each process at the outset. Whitehead & Burnett’s skilled team of business law attorneys has years of experience helping businesses, both large and small, navigate mergers and acquisitions in the state of Nevada. Let us help your business arrive at the best possible deal. We can help you develop a winning plan and implement it with the peace of mind of knowing you have trusted legal counsel protecting your interests at every step.
Steps to acquire or join forces with another company in Nevada
From the smallest mom-and-pop shop to the largest multinational businesses, any business must follow specific steps and do its due diligence when considering a merger or acquisition. In the state of Nevada, these steps and considerations are roughly the same regardless of the size of your business. What varies is the number and value of assets and the resources your business has available to evaluate and assess the costs and benefits.
1. Initial Conversations & Evaluations of the Business Opportunity
If you are considering acquiring or joining forces with another business, you have probably already had preliminary discussions with that company or firm owner. You likely have made initial business evaluations regarding the other company’s viability and believe it will enhance your current business.
2. Identify Your Team for Evaluation and Transition
If you choose to move forward at this point, your business will need to assemble a team that includes accounting, legal, and human resources assistance. This team will help you verify assets, contracts, licenses, banking systems, cash flow, and debt, if any. They will help you evaluate potential liabilities and exposure to specific issues, and these require the assistance of your legal, financial, and accounting team members.
It would be best to have a clear understanding of and metrics for your bottom line’s benefits that the merger or acquisition you are considering will provide. You should set specific, realistic goals and milestones for your KPIs (such as Sales Revenue, Net Profit Margin, or Gross Margin) when considering a potential merger or acquisition. While growth and market share are significant, having more specific targets in mind will let you hone in on the quality of any deal you are considering.
3. Prepare a Preliminary Outline of Issues
Once you have identified your team, you will prepare a preliminary outline of your new acquisition or partner’s issues in the form of a letter of intent. This will help to refine the issues for discovery and due diligence. During the period of due diligence, your team will examine the prospect to refine the arrangement and avoid as many problems or misunderstandings as possible.
4. Closing the Deal
After the letter of intent, your team will help you determine if the deal can achieve your objectives. From this thorough evaluation, your business should be able to either close the deal, walk away, or renegotiate. Sometimes, not doing the deal is your best option, and you should be willing to walk away from a deal if it isn’t in your best interests.
5. Monitoring Covenants and Performance Indicators
After closing a deal, your business will continue to monitor covenants and performance objectives to ensure the parties have performed as promised. This continuous monitoring is essential because timeframes for correcting inaccuracies are short, and issues can often only be remedied if addressed as soon as possible.
Structures for a Merger or Acquisition in Nevada
An actual merger involves two companies, usually of the same size. In the same industry, that agree to move forward as a single new company, rather than being owned and operated separately. A true merger requires a formal process of submitting a merger application with the State of Nevada. Both companies’ stocks or membership interests are surrendered, and a new company is formed. There are many reasons for companies to merge. Expanding your market share can give your business new sales opportunities. Bigger companies can also often conduct business more efficiently and profitably due to having more capital and being able to take advantage of economies of scale and enhanced negotiating power.
Forming a Parent Entity
Another option involves both companies agreeing to form a parent entity and agreeing to manage the parent entity as equal managing members (this usually happens with businesses in related industries whose enterprises complement each other). This option can provide more flexibility when structuring your business but also often requires more work. Agreements between the companies’ status should be in place, and there should be governing documents that point out each of the members’ responsibilities as well. You may choose to form a parent company to acquire new technology, intellectual property, franchising, or other licensing or expand your business offerings.
A complete acquisition involves buying or investing in an existing company and absorbing it into your portfolio. Acquisitions can be appealing because they allow you to absorb competitors and invest in new industries. Once a deal is closed, appealingly, you don’t have to worry about the other company’s interests. However, they also present real challenges because owners of the other business may not have a realistic sense of its valuation. It can be challenging to provide an offer that will seal the deal. There are also often company culture issues that take time and money to address.
Call Whitehead & Burnett Today!
For decades, business clients in the Las Vegas area have trusted Whitehead & Burnett to help them navigate some of the most complex business deals and help their businesses come out on top. One consultation could save you untold time and money (not to mention headaches) due to a poorly planned merger or acquisition. Whitehead & Burnett will give you a full picture of your business decisions’ advantages and potential pitfalls around a merger or acquisition.
Contact our Las Vegas Law office today at 702-267-6500 to speak directly with one of our business law attorneys.