- Prioritize business concerns over legal concerns
- Make clear the nature of inquiries to the management team
- Consider integration complexity at the time of target identification
It’s not uncommon to have the legal and business aspects of an M&A deal at odds. Scott Hile is an M&A professional with decades of experience on both sides. His legal experience started in Silicon Valley in the 2000s, with the tech-driven boom of acquisitions and investments. His experience on the business side was highlighted by 5 years as a vice president of corporate development at the global diversified industrial company - Milliken & Company.Hile says M&A legal influences fall squarely into two camps: those who are able to prioritize business issues over legal concerns and those who do not. “I think the balance I've been able to find is not making mountains out of molehills,” says Hile. “If you're on the outside, you have to understand your clientele and their risk tolerances. On the inside, you better understand issues fully, so you don't let issues get raised that may be easy to address, or the mitigation is something that is not material from a financial standpoint.”
According to Hile, it’s important that mitigation plans be developed “so that it doesn't distract senior leadership away from the issue at hand, that the goals of the acquisition are achieved.”
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As Hile sees it, before diligence begins, a proposed M&A transaction is a mere “a hypothesis" with limited information available. He suggests teams test the acquisition hypothesis quickly, before legal work begins. If the acquisition hypothesis does not pan out, any potential legal issues become irrelevant anyway.
When it finally comes to the legal diligence, Hile advises not to overlook the importance of making sure the drivers behind due diligence inquiries to management teams are made clear. “Lobbing questions over without reasons leaves it to the sellers and their advisers to try to guess why you're asking.” He says he has seen first-hand how doing so can be detrimental to reaching the subtle negotiation point where both parties feel like they're winning. “You're destroying the trust that you worked so hard to build.”
One of Hile’s biggest takeaways after nearly 20 years of M&A experience is the importance of tying target identification, diligence and negotiation, and finally integration together, and always including integration planning during the diligence process. “Instead of treating these as siloed activities, look at it holistically. With constant visibility into core drivers, decisions can be made on the front-end that allows for optimal impact on the back-end.
Hile went so far as to advise that integration should be considered even earlier. “Overlooking integration complexity at the time of target identification is something that is too often overlooked, but it’s one of the easiest ways to enhance the probability of success.”
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