As business leaders continue to battle with unrelenting staffing and supply chain issues, they are turning their attention to mergers and acquisitions as a solution for overcoming these immediate barriers to business success while achieving expansion and growth.

In this article Zac Herps, managing director and lawyer, provides insight that outlines the benefits of merging or acquiring other businesses while shining a spotlight on important, and often-overlooked matters that can impact successful outcomes.  

In the wake of the global COVID shutdown, business leaders confronted with supply chain uncertainty and a disrupted workforce have substantially increased their interest in mergers and acquisitions (M&A). And for good reason. 

As long-term staff continue to leave their employers, taking with them years of experience and knowledge coupled with an inability to attract candidates to fill vacancies at all levels, the impacts on productivity and profitability are likely to be felt for some time to come.

Merging to gain access to valuable labour resources, expertise and IP (especially for businesses that have relied on immigration) or acquiring an aligned supply company to control access to key materials, is now a prospect worth serious consideration.

Merging or acquiring businesses has traditionally delivered a range of benefits: synergies, economies of scale, increased market share and diversification, and I’d suggest each of these matters are very high on many business leaders’ list of priorities right now.

While proactive business leaders are on the hunt for quality businesses, there’s no shortage of business owners who are ready to sell either, but I’ll address that in a coming article.

Of course, effective M&A isn’t a quick fix solution. Nor is it easy.

For business leaders aggressively exploring a merger or acquisition, the experience may well be new to you, as it’s not every day you purchase a valuable business or entity to add to your existing operations. 

Much of the process will involve sorting the wheat from the chaff, identifying suitable businesses and this involves time and considerable expense.

Getting advice early is the key. 

Successful mergers and acquisitions largely rest on a complete and thorough due diligence, valuing the business to determine an accurate and realistic purchase price and just as importantly, establishing cultural fit then correctly documenting the transaction to protect yourself once a target business or entity has been established. 

While these are among the obvious considerations, hidden amongst the detail can be issues relating to key contracts. 

For example, a ‘change of control’ clause written into a major customer or supplier contract needs to be addressed and ongoing terms of agreement resolved prior to the M&A transaction completing.

Your advice team needs a lawyer, but specifically one who specialises in M&A and who will be instrumental in guiding the process, keeping negotiations moving and finding resolutions when they stall. 

A proactive and experienced M&A lawyer will provide insight that will ensure time and money is used as effectively as possible, bringing the transaction to completion, then sticking around to manage retention clauses and such, for protecting your financial investment and the promises made by the seller, are honoured.

If you are contemplating a merger or acquisition, we suggest that you should involve your advisors at the earliest possible stage and come prepared with the following information:

• The type of target businesses you are looking for;
• Any location issues or preferences;
• Your acquisition budget; and
• Any other matters you are considering.

Knowing your plans in advance can allow your lawyers, accountants and financiers to work together on a plan that will help you identify the best target businesses, undertake due diligence in the most efficient manner possible and to negotiate the best possible price and contract terms for any potential acquisition.

For more information about mergers and acquisitions please contact Zac Herps by phone 07 3220 1144. This article was originally published by Executive Strategies here.

In what began as an experiment, we offered a number of our clients a retainer that created priority access to legal advice and a value for money service that alleviated perceived fee uncertainty and bill shock. It was a great success, and we are now fully adept at proactively collaborating with businesses to provide a range of legal services in a cash flow predictable and friendly manner.

In this article, I’d like to provide insights on the types of legal matters, common and not so common, that business owners and their executive management teams must contend with, and often more frequently than they had imagined and what you can do to be prepared and prevent them escalating.

While some areas of business legal advice are obvious – employment law, insurance, contracts and resolution of disputes – others are less so.  For example, in recent times, we’ve provided legal advice relating to the unusual, albeit a current issue, involving mandating Covid vaccinations and recent developments regarding requirements for independent contractors.

Regardless of what the legal issue might be, something fairly consistent we’ve observed is something of a general ‘head in the sand’ approach. That is, business owners and executives hope the issue will go away (but more likely, they are too busy to address it) and only deal with it when it can no longer be ignored.

Unfortunately, by that stage the issue has usually escalated and with it, the business owner or executive team has needed an elevated legal response involving disruption, time, money and sometimes, damaging public relations.

Our recently revised legal retainer model has overcome this approach as clients have a new urgency when dealing with issues as they have cost-effective and most importantly proactive access to our legal team when they need it.

The employment landscape is one particular area where we work closely in collaboration with our clients. We are first and foremost, available as our retainer arrangements enable us to offer advice quickly and share knowledge that can, and does, overcome issues before they escalate further.

The workplace is constantly changing and it’s made all the more challenging by ongoing changes to industrial relations and employment legislation. Legal issues and the advice needed is often specific to the needs of the industry, as is the case for the mining and resources sector for example.

Suffice to say, many business owners are blind-sided by emerging legal matters, and hamstrung by the urgency to react appropriately. They are often in this position because they do not have legal counsel at their disposal and this is often due to the fear associated with perceived cost.  Again, having a legal services retainer in play that clearly provides for set costs, overcomes these issues.

In addition to providing affordable access to legal advice services, we also maintain a brief on developments in workplace legislation and case law.

This enhances our ability to respond quickly (i.e. cost effectively) and offer our clients appropriate and focused advice that can often be of a highly sensitive nature in a complex and ever-changing area of law.

Our employment law specialists commonly provide up-to-date and relevant legal advice and guidance for clients, employees and employers in in these key areas:

• Interpretation and application of the Fair Work Act and Awards and Enterprise Agreements;
• Preparation and/or review of employment contracts, particularly for executive personnel including profit share and share schemes;
• Advice regarding the rights and obligations of employers and employees;
• Advice and drafting of independent contractor agreements and fixed terms agreements;
• Legal advice and recommendations for protection from or defence of claims such as unlawful dismissal claims, general protection claims or discrimination claims;
• Drafting workplace policies and procedures for important workplace matters including equal opportunity; sexual harassment; dismissal; discipline; internet usage and company devices and property and advice regarding employee grievances and claims of workplace bullying.

As I mentioned at the outset, our approach is one of collaboration.

We are deliberately well informed of matters relevant not just to our clients’ businesses but the industries in which they operate.

Even though we are ‘external’ legal providers, we are very much considered part of our clients’ team. This professional closeness facilitates a more intimate understanding of our clients’ business affairs than can otherwise be achieved as ad hoc legal advisors, which adds considerable overall ‘value’ in terms of legal advice and services covered by the retainer.

Working in partnership with a business owners’ financial controllers and HR departments, and in larger organisations, with others in their external advice team such as accountants, HR consultants and other professionals, enables consistent, seamless and properly integrated solutions.

We offer a full range of legal services including Litigation and Dispute Resolution, Industrial Relations and Employment, Business Structuring, Finance, Debt and Capital Raising, a full suite of Corporate and Commercial services, Intellectual Property and Technology and Property and Projects.

Next steps

Review the number of hours you and your executive team have dedicated to managing legal issues over the past 12 to 24 months as a direct management time cost, identify the type of issues you most commonly deal with and also add up how much you’ve paid in legal fees over that time.

Importantly, don’t avoid dealing with important legal matters and engaging a legal support because you are worried about what the cost ‘might’ be.

Finally, please make contact me with me for discussion about tailoring a legal retainer that is appropriate to your business and industry needs that’s cashflow friendly and affordable.

To get in contact and make a time to discuss your personal circumstances simply send us an email or call 07 3220 1144.

This article was originally published by Executive Strategies here.

If there’s one thing I’ve learned, it’s that I’m not alone when it comes to dealing with what can often feel like insurmountable business challenges. I have discovered that regardless of the size or type of business, the issues faced by business leaders today are remarkably similar. It’s often only the scale that differs.

For me, accepting I don’t have all the answers was an important first step. The second, was to accept that I don’t know what I don’t know and to ensure I assembled a support network that filled the gaps in my knowledge and provide access to alternative points of view.

The third was to create structure otherwise there can be a lack of barriers or boundaries and that can invade your professional life. One such way is by insisting upon an agenda to ensure I don’t meander off course. But, just as importantly, I accept there are things that are simply out of my control and to be at peace with knowing I’m doing all I can to lead my team and the business.

For instance, business leaders and executives are currently grappling with flexible working arrangements, talent acquisition, salary expectations, productivity values and staff retention. Those issues are of course some of the many issues that need to be considered when operating a successful business.

These issues like all the others are set against a backdrop of events that are out of a business leader’s control – Covid, floods and war in the Ukraine, rising interest rates and other inflationary pressures.

Most businesses are finding staff retention difficult and no doubt this will be a major issue for some time. The great resignation has been coined for a reason. Human resources and industrial relations have had to adjust and up their game to not only remain abreast of staffing issues but to get ahead of them.

Policies around Covid, flexible working arrangements, competitive salaries, compelling employment conditions and the practical application of all of these matters are difficult to navigate, yet the success of these policies can directly impact staff retention and acquisition and greatly improve your business and bottom line.

As a lawyer and business leader, I can attest to the value of ensuring your workplace policies and procedures are legally correct but also in sync with current and emerging employment conditions.

Equally, it’s imperative to ensure your employment contracts strike the right balance and protect your rights as an employer while providing the remuneration and certainty craved by candidates you wish to attract and engage.

Suffice to say there’s a lot, too much in fact, for any business leader to singlehandedly address on their own.

Relying solely on your own devices is not the solution. Accept that you don’t know it all.

Get a mentor, or several. Mentors come in all shapes and they are more available than you think.

For me personally, my mentors and sounding boards can range from close friends who own businesses and are happy to discuss issues informally over a few drinks to a formal advisory board of peers. The latter relates to more significant enterprises, and in my case, allows me to bend their ears each month on industry specific matters so I can benefit from their vast experience.

While sharing business insights is often the reason for seeking a mentor, perhaps the greatest benefit is engaging with someone with lived-experience who understands and guides and empathises.

Potential mentors and sounding boards may include your lawyer, accountant, other C-Suite executives themselves and financial advisers. All have access to a diversity of personal and client circumstances and can provide insight and opportunity for organising your thoughts, forming strategy and generally benefiting from their personal support and professional reassurance. Of course you can also be a mentor for the others and offer your insights as well. 

In that vein and wearing my lawyer hat, implementing retainers for specialised advice and services you can’t afford to have in-house, is an investment that pays dividends.

For example, almost all medium-sized businesses need some form of regular legal advice to deal with staff and employment law, property and premises, contractual engagements and terms, finance and debt, insurances, suppliers and dispute resolution matters. Yet there’s a general avoidance of lawyers until there’s a problem. Usually by then the situation has escalated and the solution becomes significantly more complex and costly than if it had been avoided in the first place or addressed early.

Implementing a legal or other specialist service retainer means an executive can pick up the phone at any time and ask the “what-if” question. Problem mitigation is the desired outcome, and early intervention is far less disruptive and expensive than having to react once there is an issue. The nature of an annual retainer paid as monthly instalments also smooths out the impact of lump sum professional services fees on your cashflow.

However, my point is this: to be an effective leader you need to establish a support system that provides perspective, access to information and the wisdom of others.

To get in contact and make a time to discuss your personal circumstances simply send us an email or call 07 3220 1144.

This article was originally published by Executive Strategies here.

Such arrangements, especially lending, need to be formalised with an agreement and security in place in case the borrower defaults on repaying the loan or due to other financial difficulties that could impact you.

Clearly articulating your lending terms is important for avoiding any misunderstanding between parties.  Even so, you should recognise the possibility that if things go badly, despite your best efforts and written agreement, there could be irreparable damage to personal relationships.

If you do feel you are in a position to privately finance someone or their project, you need to behave more like a bank than a friend or relative, especially if the loan is over a long term.

Like a bank you will have to have a formal loan agreement and security documentation.

The key is to have clear, legal, written documentation of BOTH the loan agreement AND the security taken against the loan. This is because, security is only a safeguard for the loan amount if there is a documented liability to actually pay the debt. Importantly, the loan agreement itself must be enforceable and your security interest will generally only be valid if it is provided at the SAME time a loan agreement is made.

Loan Agreements

You will need to properly document the amount of the advance, interest payable on the amount (if any) and details about repayment requirements such as frequency of instalments and the completion timeframe.

In the case of loans to family members, there are often no specific repayment expectations, however nominating a repayment time frame in the loan agreement gives certainty and increases the enforceability of the loan should yours or their circumstances change. If you reach the stated time for repayment, you can always provide an extension.

Security

As to security, and there are three common options, which are not mutually exclusive:

Personal Property Securities Act 2009: A General Security Agreement under this Act provides security over all of the assets held by the borrower. This type of security has greater value in circumstances where a business has tangible assets. These assets would usually include plant, equipment or stock that can be sold to recoup the unpaid loan and/or any interest payable.

Personal guarantee: In a business lending situation, one or more company directors or shareholders would be asked to offer a personal guarantee that the money be repaid.  Care must be taken with personal guarantees to ensure that the guarantor knows and understands to what they are agreeing and has or has the opportunity to seek independent legal advice as to the guarantee.

Mortgage

If the company, individual or one or more company directors or shareholders you are lending to own land you may also wish to require a mortgage over the property owned.

The value of the security will be limited by what the creditor actually owns (you can’t get blood out of a stone) or what security any other creditors may already have in place.

For example, a bank may have a mortgage over the same property you also intend to as security.

While it’s important to beware of any other creditors who may be ahead of you, should things go wrong, being listed as a secured creditor as this will place you in a much stronger position than an unsecured creditor.

Next steps:

Before entering into any private lending arrangements assess your own capacity to lend money by reviewing your surplus cash situation. Consider (perhaps in consultation with your financial adviser) any future circumstances that might mean you will need access to that money; or if indeed you don’t need, or wish for, it repaid at all.

You should formalise arrangements. Ask your lawyer to document clear loan terms including the principal amount, repayment arrangements including interest rate, and details should the borrower default.

You should also seek accounting and taxation advice prior to entering into any private lending arrangements. Private lending can be very rewarding way of helping others, so it’s important to take a structured approach which is all about good practice, clear communication and in the spirit of achieving goals.

Take it from me, those who are given the opportunity to benefit from your ability to provide private lending won’t think you are some kind of modern-day Scrooge with rules and obligations, they will be appreciative of your generosity, and your organised and fair approach.

To get in contact and make a time to discuss your personal circumstances simply send us an email or call 07 3220 1144.

This article was originally published by Resources Unearthed here.