M&A: How Much Does it Cost

When it comes to small business mergers and acquisitions (M&A), legal costs can be a significant factor in determining the overall success of a transaction. Whether you’re a buyer or seller, understanding the types of legal costs involved and how they impact the sale process is crucial.

What Are the Legal Costs in M&A?

Legal costs in M&A transactions cover a wide range of services, including drafting and negotiating contracts, conducting due diligence, handling compliance issues, and ensuring a smooth closing. These costs can vary depending on the complexity of the transaction, the industry, and the size of the business.

The size of the firm and skill of the attorney also plays a crucial roll. Large firms charge around $850 per hour, while solo firms generally charge half of that. Before you hire an attorney, make sure they have the skills and network to make the transaction efficient.

Types of Legal Costs

1. Drafting and Negotiating Agreements
   The purchase agreement is the most critical document in an M&A transaction. Lawyers draft, review, and negotiate the terms of this agreement, which outlines the purchase price, assets being transferred, and any liabilities being assumed. This document can be complex, and the cost of legal services in this area depends on the level of detail required.

2. Due Diligence Reviews
   Legal due diligence involves reviewing all contracts, financial documents, intellectual property, and potential liabilities. This process can uncover hidden risks, such as pending lawsuits or regulatory non-compliance. The more complex the business, the higher the legal costs for conducting thorough due diligence.

3. Tax Considerations
   M&A transactions can have significant tax implications for both the buyer and the seller. Lawyers often collaborate with tax advisors to structure the deal in a way that minimizes tax liability. This aspect of the transaction can add to legal costs, but it can also result in long-term savings. Ahaji Amos, PLLC will work with trusted CPA’s to make sure that your tax strategy won’t impede your deal.

4. Compliance and Regulatory Fees
   If the business operates in a regulated industry (e.g., healthcare, finance, or food services), there may be additional legal costs to ensure the transaction complies with industry-specific regulations.

How to Manage Legal Costs

• Plan Ahead: Understand that legal costs are an inevitable part of M&A. Budget for them early in the process.

• Use Specialists: Consider using legal specialists in M&A who understand your industry and can streamline the process.

• Negotiate Fees: Some legal fees are negotiable. Discuss the fee structure with your attorney to understand what you’re paying for.

Conclusion

Legal costs are an integral part of small business mergers and acquisitions. By understanding these costs and planning accordingly, both buyers and sellers can ensure a smoother transaction and avoid unexpected expenses. Ahaji Amos, PLLC can help.