The acquisition process could start as early as the search for the right target company where the lawyers would assist in the drafting of the Memorandum of Understanding, Non-Disclosure Agreement or setting out the terms for the Letter of Intent on a potential acquisition of a target company.
It has become more common that companies engage more specialised professionals including lawyers to be involved in the due diligence exercise and/or to evaluate the information obtained from the information gathering stage.
Lawyers are almost always involved in the negotiations of the terms and conditions acceptable to both parties and do sometimes (all in the interest of protecting the client) get carried away when it comes to not agreeing to certain terms and conditions.
Ultimately, the vendors and purchasers’ primary objective is to seal the deal but be protected from entering a bad deal or overpaying for an asset in a company. Imagine a new owner saddled with debts and contingent liabilities unforeseen from a due diligence exercise and this could sink the new owner’s prospects of successfully continuing the target business.
To avoid a whole host of issues, lawyers then get involved in a tug-of-war in the terms and conditions to ensure that every possible situation, foreseeable or unforeseeable, is covered in a Sale and Purchase agreement. Sometimes, if a lawyer does not understand the commercial considerations or carefully assesses the risk with the businessperson, the lawyer may well be the “bottleneck” to foil the deal.