If your company is considering a merger or acquisition, do your homework first and make sure the board is in the loop. And while you are at it, bring in outside counsel early enough to avoid problems later.
“Be prepared, particularly if you are a public company,” says Brian JM Quinn, assistant professor of law at Boston College Law School and editor of the M&A Law Prof Blog. “Have a plan with the board so you know what to do in the event that the board or the CEO is approached to be acquired or to take the company private, for example.”
The plan does not need to be detailed, but it at least should contain an idea of what a response should be. Companies sometimes get in trouble when they don’t have plans, and they find themselves making missteps early on.
The board should make instructions clear to the CEO if there is an approach. How much time can a CEO discuss a potential offer with a third party before the board wants to know? To how much can the CEO commit?
“The biggest problem the board’s going to have is just not being in the loop,” Quinn says.
It is possible for a CEO to get approached by a third party, and for whatever reason, the CEO feels it’s not serious ? and will tell the board at its next meeting, which might be in a month.
“That might be too long,” Quinn says. “These are the kinds of things the board can tell the CEO or C-level managers if you get a proposal that's reasonable or seems like it might be reasonable, we want to know.”
Bringing in outside counsel early enough is especially helpful if your company is new to the process of mergers and acquisitions.
“If you are on the sell side, if you don’t bring in outside counsel, bankers or advisers to assist you in the process, you may find yourself giving away more than you would want to just because you don't have the same level of experience in the process as the people on the other side,” Quinn says.