There’s a big difference in mergers and acquisitions when the sale is in the family. All deal transactions require legal advice from trusted lawyers, many of whom have a long-term relationship with the business. But in family sales there are emotional issues that need to be addressed, and that definitely takes a lawyer with a long-term relationship.
That’s the position of Scott Anderson, of counsel at Fabyanske, who has worked in privately held and family-owned businesses for 40 years. He said there are ways to address those concerns ahead of time. One is through succession planning that can transfer wealth to the second or third generations but leave the first generation in control of the sale of the business. Another is to transfer ownership of shares to a trust where the fiduciary can control the sale.
The mergers and acquisitions market right now is awash in “dry powder,” which means cash or lending ability credit, Anderson said. He agreed with estimates from other lawyers that there is about $2 trillion in private equity funds out there.
And private equity needs to invest that money because it can only hold it for a limited amount of time. The money isn’t always available for subsequent withdrawals based on the terms of the investment agreement.
And it is an attractive, sophisticated buyer, Anderson said.
“Say there are two different purchasers, one is private equity and one is a competitor,” he explained. “The private equity firm may have done more than 20 transactions, have funds or can call on funds, and relationships with accounting firms or lawyers. Compare that to a competitor that doesn’t have long-term relationships with lenders and really does not have a team of people that are sophisticated in negotiation and performing due diligence.
“The private equity firm can go much more quickly. Typically a competitor doesn’t have the same lending capacity. Private equity has more cash tor lending.”
Anderson concluded, “mergers and acquisitions” have always been driven by relationships.