An M&A transaction is a complex and multifaceted process that requires thorough preparation and the right strategy. It is not just a legal deal but also an opportunity for a company to scale and benefit from synergies with new partners or investors.
The speaker of the event, Oleh Malskyy – Partner ETERNA LAW, Head of Corporate & M&A, Head of International Trade, discussed:
Who can be a buyer of an IT business?
- Strategic buyers: other product or outsourcing companies aiming to integrate new technologies or expand geographical coverage.
- Funds: venture or investment funds that consolidate companies for subsequent resale.
- Public companies: which use shares for partial payment of the deal.
Key factors for assessing IT companies before an M&A transaction: client base, cash flow, intellectual property, technologies, development teams. The importance of auditing ownership and capital structure, including checking patents, licenses, and contracts with founders and developers.
Main risks faced by IT companies in M&A deals:
- Tax risks — reclassification of sole proprietors (FOPs) as employees.
- Legal risks — proper transfer of intellectual property rights, as well as possible disputes over contracts.
- Client relationship risks — whether it will be possible to maintain important contracts and partnerships after the change of ownership.
What can be done after selling an IT company?
- Non-compete agreement (NCA): typically included in the deal to ensure that former owners do not start competing with the new owner. It lasts from one to three years.
- Post-sale actions: founders may remain with the company for a certain period to ensure stability after the ownership change.
Real Option and bonus packages are used to attract and motivate key employees after the deal. They allow owners and investors to manage the situation during the merger or acquisition process.
It is important to choose the right deal structure: whether it concerns the sale of assets or shares, determine the price adjustment mechanisms, and whether additional bonuses for management will be provided.
