6 Issues in M&A transactions

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6 Issues in MA transactions
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Lets take a look at the major issues that
organizations need to avoid for a successful MA
transaction.
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Issue 1 Unsuitable Deal Structure
One of the biggest issues that cause a difference
of opinion is the transfer of liability. In case
of a stock purchase, complete liabilities are
transferred to the acquirer. In a merger, the
surviving entity has to take responsibility for
the liabilities but in an asset sale, only
specifically assigned liabilities are passed on
to the buyer.
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Issue 2 Failure To Agree On The Final Price
Another common issue that can arise is
differences over the final price of the target
company. The method used to assess the worth of a
business becomes important in such cases.
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Issue 3 Mode Of Payment
The method of payment used for settling the deal
can also be a potential cause for an issue. The
easiest way to make payment is through cash.
Sellers prefer this method as least risk is
associated with it but it can affect the
acquirers capital structure or debt rating.
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Issue 4 Disagreement on Escrow Details
A part of the total purchase price amount is held
in an escrow to protect buyers from losses
occurring due to the breach of representation and
warranties by the seller.
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Issue 5 Terms of Seller Representation and
Warranties
One of the major issues in MA transactions is
caused by differences over the framing of
representations and warranties.
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Issue 6 Differences Over Indemnification
Provisions
The conditions put in the document which will
have to be fulfilled by sellers on breach of
representations, warranties or other terms can
significantly reduce their returns from the sale.
While buyers want the scope of the
indemnification to be wide and go beyond
representations and warranties, sellers want it
to be limited in scope as well as duration.
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Conclusion
Best way to avoid issues in MA transactions is
to engage Mergers and acquisitions lawyers who
have considerable experience in assisting
business organizations to successfully close such
complex deals. Resource https//blog.ipleaders.i
n/6-issues-ma-transactions-can-derail-deal/
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