SMB M&A - Corporate Structure and Governance
Understand the target company's corporate structure. It is like taking a closer look at its organization and operation. It's essential as it affects decision-making, responsibilities, and the success of your acquisition. Here are some key points to consider:
Organizational Documents: Check the company's rulebook, –articles of incorporation, and bylaws. These documents outline how the company is supposed to function. Any surprises in there could mean trouble down the line.
Ownership Structure: Figure out who owns what. Look at the shareholding structure and any agreements among shareholders. Make sure there are no hidden surprises or disputes that could complicate the deal.
Governance: This is all about how the company is managed and how decisions are made. A solid governance structure ensures that everyone is on the same page. Here's what you need to focus on:
Board of Directors: Know who's at the helm. Check out the board of directors, their roles, and their qualifications. Any red flags here could impact the company's strategic direction.
Decision-Making Processes: Understand how decisions get made. Is it a smooth process or a tangled web? You want to make sure you're stepping into a well-organized system.
Compliance with Laws: Ensure the company follows the rules. Check if it complies with legal requirements and industry regulations. Non-compliance could lead to headaches and fines.
Shareholder Agreements: Read the fine print. Look at any agreements among shareholders. Are there clauses that might affect the deal or your plans for the company? Why Does This Matter for You as a Buyer?
Imagine buying a car without knowing if it has a good engine or the brakes work. Corporate structure and governance are like checking under the hood of your potential business. Here's why it's crucial:
Smooth Transition: A well-structured company is more likely to transition smoothly. This means less disruption for you and the business.
Reduced Risks: Understanding the governance and structure helps spot potential problems early. It's like doing a health check-up before committing.
Strategic Planning: Knowing how decisions are made allows you to plan for the future. You can see if the company's structure aligns with your goals and if changes are needed.
Essentially, it's about ensuring you're not inheriting a messy structure. Governance issues could come back to haunt you. Take the time to dig into these details, and you'll be better prepared for a successful acquisition.
*Disclaimer: this article is for informational purposes only. It is not providing legal advice. It does not create an attorney-client relationship.