In an article for Chief Executive published on July 15, 2019, Andrew Lohmann and Andrea Mousouris address some common “deal killers” buyers and sellers can run into when closing an M&A transaction. These potential pitfalls include:
- Government Contracts – If a target qualifies as a “small business concern,” the pending transaction could impact the target’s qualification. Additionally, the structure of a deal involving government contracts could impact the transaction schedule due to required government approvals for the transaction to move forward.
- Employee Misclassification – Misclassifications of employees, such as independent contractors and “exempt” or “nonexempt” employees under the Fair Labor Standards Act, can have expensive repercussions, such as tax liabilities, government fines and penalties.
- Sales and Use Taxes – Material sales tax exposure may impact deal negotiations between a buyer and seller. Specific indemnification procedures may need to be developed and implemented in the purchase agreement if it is decided that post-closing remedial procedures need to be pursued.
- Employee Benefits – Because employee benefit plans are immensely regulated by the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, they can introduce legal and operational obstacles and significant liability exposure for buyers.
“While there are a handful of M&A deal killers that can arise, experienced M&A counsel can identify potential issues upfront and help to negotiate liabilities to avoid having a transaction crumble,” explained Lohmann and Mousouris. “Careful due diligence of the above issues can help set your deal up for success and help navigate common obstacles that may appear.”
To read the full article, please click here.