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What is Mergers and Acquisition? A French Law Firm s expertise

Home > French Business Law | Published 2010-10-04

Our French Law Firm advises multinational industrial and service companies in structuring and completing domestic and cross-border mergers and acquisitions.

We have extensive expertise in both public and private M&A transactions and regularly work on buy-side and sale-side engagements in a variety of industries.

M&A transactions are extremely time sensitive and the responsiveness of the law firm represents a significant tactical advantage. To meet the challenges posed by this environment, we assemble a team of skilled lawers for each transaction. Experienced M&A lawyers possessing state-of-the-art knowledge regarding structures, tactics, and legal developments are at the team’s core. The rest of the team has expertise in areas such as antitrust, intellectual property, tax, and employee benefits.

You will find hereafter the M&A approach that our law firm would normally provide when retained to find targeted acquisitions for a client.

Before any acquisition, there are some key questions that must be satisfactorily answered before the buyer will agree to the operation.

What does the target company look like?

In today’s business environment, timely and accurate intelligence is an absolute must. This is why you must plan using due diligence before acquiring a target company.

Due diligence investigations not only protect your current or future investment, but they safeguard your company’s reputation.

You will never be 100 percent certain that your business relationships will work out as planned, but due diligence goes a long way toward ensuring a beneficial, rather than detrimental, deal.

Our law firm will help you through this important step. Whether it is a limited public records search, or an in-depth investigation, our due diligence team will make sure that your deal meets your business objectives.

Due diligence investigations encompass a wide variety of investigative techniques. You will find below a brief overview of process of due diligence.

From a legal point of view, it is necessary to check

  • The legal structure of the target company: whether it is a partnership or a private limited company, the legal procedure will not be the same (for instance: which executive body has to be consulted? When do you have to consult it? Which quorum needs to be obtained for authorizing the operation?) ;
  • The contracts signed by the target company: it is not unusual to detect some anomalies. This is why a thorough audit of each contract signed by the target is critical;
  • The conflicts (or potential conflicts) in which the target company is involved: is there a financial risk? Is it possible to calculate it? Is it significant? 

From a social point of view, it is also essential to know

  • How many employees are there in the target company? 
  • Is there a workers’ union inside the target company? What will be its reaction? Is it possible to anticipate it? Is there a strike risk? What will the consequences be?
  • What is the organic structure of the target company? Are synergies or added values possible?
  • What is the Human Resources policy?

From a tax point of view, you must determine the method of taxation elected by the target company, and its consequences. In other words, is this the most appropriate method?
Moreover, is this possible to reduce the final tax bill?

The last section to check is that of finances. It is essential to pay close attention to the target’s financial status.

We can help potential buyers have a realistic perspective of the trends and underlying finances of the target company. During this initial phase, business ratios and common size financial statements must be calculated. It is important to ask such questions as:

  • What is the future earning capacity of the company?
  • Does the target have sufficient working capital to sustain growth?

It is also important to know what the financial control environment is.

Proceeding this way, we will provide you with a realistic understanding and awareness of the target’s growth potential.

How much should the buyer pay in order to acquire the target company?

This section will present an industry-accepted appraisal model using several financial approaches, e.g., market value, accounting value of assets and liabilities.

According to the legal system applicable to the target company, it is important to note that goodwill is not necessarily taken into account in the valuation of the target company.

Considering this important data, the buyer will be able to more precisely understand the asking price. After viewing this section, the buyer should have a realistic view of the target company and a reasonable price range to offer for its acquisition.

What will the purchase ultimately cost?

Our law firm can help you optimize the acquisition from a tax, social and financial point of view.

We can substantially reduce taxes and social contributions by creating the legal entity most adapted to your business. For instance, our firm reduces, for company managers, partners and certain categories of personnel, the payroll taxes from 60 % to about 20 % while maintaining a static level of quality social protection and coverage.

Moreover, we have mastered the idea of set-up with options such as the leverage-buy-out (LBO) or joint ventures. From this, we are able to provide you with the cheapest possible means of acquiring control of the target company.

Wherever the operation takes place, we will provide you with our local network of top-quality lawyers capable of offering the most suitable advice.

What is the most appropriate form of financing?

Although obtaining funding for the acquisition is actually the buyer’s responsibility, we can increase your chances of completing the sale by eliminating the guess work in financing options.

Essentially, we show the buyer the best funding plan that creatively utilizes all financial resources and instruments available to the buyer. In other words, we help you in drafting a realistic business plan.

This is why we need to know, for instance, how much secured debt the target may borrow against assets, or whether the target will be solvent after acquisition financing.

Is there a growth potential?

Ultimately, the key question should be: what investment return can the buyer expect from the acquisition? Do not forget: The M&A needs to be a new source of growth.

Therefore, it is essential to determine whether there are income statements or balance sheet line-items that require increased levels of financial resources. In the same way, it is also important to know if the target will satisfy the financial regulations imposed by a lender.

In today’s globalized economy, competent M&A representation requires international expertise. Our lawyers have extensive experience in international M&A transactions and their management.

Considering the complexity of French and European law, any operation of M&A must be cautiously planned and applied. Therefore, our firm may accompany you through all negotiations and the drafting of relevant and necessary legal documents.

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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