Legal Aspect of M&A Deals: Consideration of Structuring and Key Documents

Mergers and acquisitions (M&A) are recognized as one of the key business strategies for the growth and development of companies. This process of combining or acquiring businesses requires not only strategic planning but also competent legal structuring. In this context, lawyers play an important role in ensuring the successful completion of M&A transactions, taking into account complex legal aspects and providing legal security for all parties involved.

What is M&A Deal Structuring?

M&A deal structuring is the process by which the form and terms of the merger or acquisition of companies are determined. This involves developing an optimal legal, financial, and organizational structure to maximize the benefits to all parties involved in the transaction.

M&A deal structuring is outlined in a Term Sheet document, which includes:

• definition of ownership structure;
• financing terms;
• tax implications;
• mandatory transaction terms, and more.

The goal is to create a deal that considers the interests of both parties and contributes to the successful achievement of the financial and strategic goals of M&A.

Features of M&A Deals in Ukraine

The basic algorithm for implementing M&A deals remains unchanged, including stages such as MoU/LoI, due diligence, final agreement execution, and subsequent actions after deal closure. Despite the conceptual stability of the structure, certain stages have become more significant or have changed due to economic and political transformations in Ukraine in 2023.

Investors considering merger and acquisition opportunities in Ukraine pay more attention to conducting due diligence before purchasing. Due diligence involves assessing new risks associated with the war with Russia and reassessing common risks. Investors are concerned about the stability and ability of the target company to adapt in wartime conditions.

There is also an increase in the duration of deals due to their division into separate transactions related to financial indicators. This strategy allows investors to enter the Ukrainian market more systematically, reducing the risk of capital loss.

In 2023, the business environment in Ukraine affects the ways in which companies conduct M&A operations. There is an increase in the use of conditional payments based on financial results of enterprises. Various methods of calculating the acquisition price are often applied, such as adjusting the price due to changes in the company’s financial indicators or fixing the price using the “locked box” mechanism. Less attention is paid to provisions related to material adverse changes in the context of Russian aggression.

Interestingly, the popularity of using foreign jurisdictions to conduct M&A transactions is growing due to restrictions on currency transactions in Ukraine. This is happening because of the limitations on currency exchange established by the National Bank. Sellers wishing to receive currency often use foreign legal entities and accounts in foreign banks to receive payment, facilitating the subsequent use of funds received in other countries.

Structuring through Acquisition

Structuring through acquisition is a strategic process whereby one company acquires another, taking control of it and combining their assets and operations. This approach allows the parties to optimize the merger process, reduce risks, and ensure the effective integration of both companies.

Features of Merger Structuring

Merger structuring is a strategic process of organizing a merger and acquisition (M&A) transaction in which two companies merge their business operations and resources, forming a single corporate structure. The main goal of merger structuring is to ensure synergy, i.e., the emergence of additional value or efficiency through the combination of resources, technologies, and market opportunities of both companies.

What Lawyers Do in M&A Deals

If you need qualified assistance from M&A specialists, contact Dextra Law firm. Our range of services includes:

• development of a deal strategy to ensure the best financial conditions and business protection norms;
• mediation in introductory communications;
• provision of non-disclosure procedures;
• development and implementation of a Term Sheet;
• development and implementation of a Letter of Intent;
• conducting due diligence audits and preparation for their passage;
• checking compliance with antitrust legislation;
• obtaining permits as needed;
• preparation of final contracts and agreements;
• post-closing obligation support;
• compliance monitoring.