January 27, 2023
Companies negotiating lower middle market and add-on mergers and acquisitions can take several important steps to ensure they get the business and legal elements of the deal right and minimize their legal spend and risk exposure. In an article published in the winter 2023 edition of Deal Points, the newsletter of the American Bar Association's Mergers and Acquisitions Committee, McGuireWoods Charlottesville partner Clare Lewis and associate PJ Harris lay out helpful guidance to avoid high legal bills and right-size the risk analysis.
A bolt-on deal doesn’t necessarily require less legal work than a billion-dollar deal, Lewis and Harris cautioned — in fact, the opposite can be true. Smaller deals may require bespoke drafting, and the companies involved may be inexperienced at making such deals run smoothly. As such, the parties must negotiate due diligence expectations carefully since representations and warranties insurance typically is prohibitively expensive for sub-$30 million deals.
In the article, titled “M&A Considerations for Management in Small Deals,” Lewis and Harris laid out key principles for companies to follow to maximize value, minimize risk exposure and reduce the likelihood of subsequent litigation. Companies should understand the structure of the deal, do their homework ahead of time and be thoroughly prepared. They also should have experienced M&A counsel to guide them through the process.
“While it may take considerable time and effort to get a small M&A deal across the finish line, it is worth keeping in mind that the cost associated with excellent legal assistance is a small price to pay for getting the deal done in the most advantageous and beneficial way for all stakeholders involved,” the attorneys wrote.