Much like everything, Covid has an impact on mergers and acquisitions. Post-covid there are new considerations and complexities to the process.
Due to the impact on the business, you need to determine the solvency of the business you are going to acquire. Look at cash flow, any impact on recurring revenue if relevant, and employee changes during the pandemic. Are there operational issues or risks? Is there a business continuity plan in place? Is IT secure with a process in place for work from home/bring your own device?
Something else to consider is force majeure and the ability to suspend performance obligations. This ought to be examined or included.
Depending on the details of the transaction, your circumstances might constitute a “Material Adverse Change” provision which would allow a purchaser to walk away from a sale and purchase agreement.
If you are a buyer, you may want to include warranties covering the potential impacts of our current business climate on the business you are looking to acquire. The impact of the pandemic is still being felt and there is uncertainty about the economy.
Supply chain issues should be explored, if relevant. Additionally, you will need to gain a strong understanding of what is in place for health and safety compliance for employees.
If you have an existing business entity that is bringing the new business into the fold, and you have in-house counsel that has specific mergers and acquisitions experience, you should be fine. Otherwise you will definitely need a lawyer that is very well versed in mergers and acquisitions to help you wade through these key due diligence points. Having a lawyer work on your contracts related to the transaction is a must. You can’t afford not to. Depending on the complexity and size of the transaction, multiple lawyers may be warranted.
While there are some uncertainties, we are seeing movement in the mergers and acquisitions area. With change, there is often opportunity and after all the changes the last few years, the bright side is the merger and acquisition opportunities.
