White Paper | M&A in Online Specialty Retail
The McLean Group | Jones Day
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Mergers & Acquisitions in Online Specialty Retail
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Even though a company may have diligently allotted a significant period of time to prepare for a sale, many
unexpected issues can arise that can hinder or halt negotiations, including:
Changes in the macro economy.
Force
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majeure events like 9/11.
Changes in the outlook of the company’s industry and the growth of online retail.
Sales of one or more similar companies at unexpectedly low prices, and
Sudden negative changes in the company’s financial and/or operational performance.
Properly preparing to address such issues in the event they arise generally increases the efficiency of the sales
process, while helping maximize value. Companies considering a recapitalization/capital infusion that address
such issues will likely engender confidence among investors that may translate into a more easily and likely
consummated investment.
Companies that engage an investment banker and transactional legal counsel early in the process will benefit
from their advisors’ efforts to facilitate an effective exit planning process. The investment banker can help the
company clarify objectives. The investment banker also can provide an initial valuation and periodic
monitoring, make recommendations addressing weaknesses, and help determine the right time to seek a capital
infusion or sale of the business. Experienced legal counsel can help companies prepare for buyer due diligence
and address legal and tax issues which may impact the sale transaction and maximize stockholder return.
THE BUYER’S PERSPECTIVE: CONDUCTING DUE DILIGENCE
Once two companies have agreed to move forward, a wide variety of financial, legal and commercial
documents and records will be reviewed and analyzed carefully by the acquiring entity and its legal counsel.
Due diligence helps the acquirer answer two very basic questions: (1) Why are we doing this deal? and (2)
What risks will we assume if we decide to proceed?
The following is an illustrative list of some questions the acquirer and its legal and accounting advisers will try
to answer as they move forward with the proposed investment/acquisition:
What approvals will be needed to effectuate the transaction (e.g., board and stockholder
approval, governmental consents, commercial third-party consents, lenders’ and lessors’
consents, etc.)?
Are any antitrust problems raised by the transaction? Will filing be necessary under the
premerger notification provisions of the Hart
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Scott
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Rodino Act?
Does the seller own its IP? Is the seller’s IP protected? Are there any limitations on its use?
Has the seller complied with applicable sales and other tax obligations?
