Lifecycle of a Technology Company: Step-by-Step Legal Background and Practical Guide from Startup to Sale

Chapter 5. ACQUISITIONS

MERGERS AND ACQUISITIONS: STRUCTURING CONSIDERATIONS^[15]

The technology company lawyer must be competent to handle mergers and acquisitions (M&A). Both public and private companies are active acquirers of other businesses. Business lawyers must be prepared to represent clients who become buyers or sellers. Unlike many other business transactions in the technology company arena, M&A work is adversarial—not in the sense of being nasty (usually), but in the sense that M&A is a zero-sum game. In an acquisition, what is good for one party is usually bad for the other. Generally, in other transactions, although the parties have different interests, in a sense they are ultimately on the same side. For example, in an initial public offering (IPO), both the issuer and the underwriters want the IPO to be a successful deal, with the IPO buyers ending up happy with their buy decision. Good disclosure in the IPO prospectus avoids liability for both the issuer and the underwriters. Not so in M&A. For that reason, acquisition practice is very demanding and may be the most difficult and complex test of a business lawyer's skills.

WHAT IS GOING ON: REASONS FOR ACQUISITIONS. Companies acquire other businesses for a number of reasons, including one or more of these:

• Extending a product line, where it is cheaper or faster (or both) for the buyer to purchase the product line and its underlying technology than develop it independently, or where the buyer cannot develop it independently ...