A lawyer to buy a business can also help with M&As
Buying a business in Canada can be exciting, but it comes with many challenges — especially on the legal side. That’s where a lawyer to buy a business comes in. They can help you deal with Canadian regulations and make sure you’re making a sound investment.
What is a lawyer to buy a business in Canada?
When you need a lawyer to buy a business, your first go-to would be merger and acquisition lawyers (M&A lawyers). They are the legal professionals who are most knowledgeable about the process of buying a business, which can either be through a merger or an acquisition, or any of its similar types. While there are some differences between the two, they’re still related to each other in some ways; for example, Canadian competition laws similarly apply to both.
In any case, buying (or selling) a business in Canada without the assistance of a lawyer would be difficult. From the drafting of necessary contracts to close the deal, to other legal considerations both federally and provincially, it’s necessary to consult a lawyer at some point in the transaction.
From a lawyer’s perspective, here’s a usual process of buying a business, which also hints on where lawyers come in the picture:
Know more about buying a business or M&A deals through a Lexpert-ranked best M&A lawyers in Canada. This directory can be filtered according to province and city.
What are the roles of lawyers when buying a business in Canada?
A lawyer to buy a business can help you ensure that everything is legally in order throughout the transaction, and even protect your interests when disputes arise. The most important thing is that the deal complied with all the laws, such as statutes applicable to M&As.
Structuring the deal
When buying a business in Canada, there are a lot of business structures when it comes to M&A deals that you can choose from. The most common would be either an asset purchase or a share purchase. This is vital because each is appropriate for different circumstances:
- asset purchase: only the properties (whether real or personal) owned by the target company are bought
- share purchase: the shares held by the target company’s investors and shareholders are bought
While both may involve third parties, the consent of third parties is sought more in an asset purchase. This is especially true when the interests of third parties may be affected by the change of a property’s ownership. Another thing is that documentations may be less in a share purchase compared to an asset purchase.
Due diligence in M&As
Assessing the target business is one of the important roles of lawyers when buying a business in Canada. Just like in a typical M&A deal, due diligence is usually done by the purchasing or acquiring company against the target company. Although target companies are not prohibited from doing the same to know more about the purchasing or acquiring company.
When done properly, conducting due diligence in M&A deals would show a greater picture of the future deal, such as the:
- value of the transaction and deal structure to be used
- risks involved, to know if it can be mitigated along the way
- overall financial standing and corporate governance of the company
- legal, marketing, and human resources issues that the company is involved in
At the end of the due diligence, you’ll know whether to push through with the deal or not. This helps your company make an informed decision that is based on hard facts, rather than on mere perceptions.
Negotiating the terms and drafting of agreements
Among the specialties of lawyers when buying a business is doing the negotiations with the other party, building this up to come up with a final draft of the agreement. Usually, a buy-and-sell agreement would have to be agreed upon by both parties. Some of the important terms that this agreement should contain are:
- the purchase price, interest, and other costs
- the rights and obligations of each party
- other conditions before and after closing the deal
Aside from the buy-and-sell agreement, there are other contracts that you or the other party may enter into. Again, it’s vital to have your lawyer review or draft these contracts. Depending on the circumstance, some of these contracts may include:
- employment contracts
- franchise agreement
- lease agreement
- non-disclosure agreement
- non-compete agreement
What’s important is that everything is put on paper, since buying a business is always a contractual transaction.
Regulatory approvals and compliance
Federal and provincial laws would apply to some aspects of buying a Canadian business. For instance, the federal Competition Act may apply when certain thresholds are reached by a notifiable merger. When the purchasing company is a foreigner, the review and notification processes of the Investment Canada Act (ICA) would also take effect.
Closing the transaction
When things go well, the parties to the M&A deal proceed to the closing of the transaction. There are key steps and documentation procedures in this part that M&A lawyers or lawyers to buy a business can be of great help of. It’s also common to retain (or hire) M&A law firms to close the transaction. But even after closing the transaction, a lawyer’s assistance may still be necessary, such as during the post-M&A integration.
How much does it cost to buy a business in Canada?
There’s no definite cost when buying a business, since there are a lot of factors to consider. Not to mention that every contract price may be further negotiated by the parties until the very last minute, or at least before it’s written in ink.
The cost would also depend on the:
- type of deal structure you and the other party chose
- expenses for legal, transition, and licensing
- location and size of the business being purchased
To help you come up with a realistic — but feasible — total purchase cost, hiring an M&A lawyer would be essential. Aside from helping you through the end of the process, they can assist you in proposing a price that can surely close the deal.
Looking for help from a lawyer to buy a business? Consult the best M&A law firms in Canada as ranked by Lexpert.