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Caution necessary when considering a merger or acquisition

Mergers and acquisitions often enable Texas companies to thrive. Sometimes the transaction benefits both entities, but a decision maker at a company needs to evaluate multiple angles when approached with an acquisition offer. The due diligence process could identify good opportunities or reveal red flags that make the deal a poor direction for a company to take.

To avoid wasting time, an acquisition target should first judge the seriousness of a proposal. Any propositions that come from parties that do not involve high-level executives will likely go nowhere. A company's leadership should also identify the motivations behind any offer. The other company might simply want to eliminate a competitor or gain control of a product but ultimately fire the people working at the acquired company. An acquisition might only be a tactic for beefing up a company's value prior to an IPO.

If discussions proceed between two entities, a company should identify its deal breakers early in the process. The upfront disclosure of issues that would undermine a deal could spare both sides effort and expense on a deal that falls through. Confirmation of financing represents another crucial element that should be established in the early stages.

Throughout the consideration or execution of a merger or acquisition, a decision maker typically seeks legal advice. A business attorney could provide numerous services that support due diligence investigations and the development of contracts and buyout terms. A legal analysis of a company's value and liabilities could provide management with important insights about the acquisition. An attorney might suggest exit strategies that compensate the business founders adequately and protect them from unexpected problems.

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