10 / 20 / 23

What is the role of legal counsel in M&A transactions?

MEXICO CITY, MEXICO, October 10th, 2023 –It is essential to know the risks involved in the clients’ business and to communicate them quickly and clearly.

The growing automation of services driven by technology and the advancements in Artificial Intelligence have created a heightened demand for our services, prompting them to become increasingly specialized and personalized.

In that sense, all of us who participate in the legal sector need to be aware of these requirements and catalysts of the framework, in order to enhance – and in some cases even redefine- the added value expected from us when executing an M&A transaction.

Based on my experience, these are the five key areas to consider and incorporate into this transformation process.

Industry and Sector Insight

As lawyers we must have particular understanding of the specific industries and sectors of the economy and finance in which our clients operate. This expertise enables us to provide tailored legal advice and devise effective solutions to meet their needs.

It is important to know whether the industry in which a client operates is undergoing new regulations, understand market trends, evaluate whether it a time of sellers or buyers and assessing industry-specific risks that could impact the business outcome.

This requires that we as lawyers invest time in familiarizing ourselves with industries and business sectors our clients engage in, and gaining insight into their future trajectories. This entails active engagement in industry forums, reading specialized publications or attending events where experts communicate trends and listen to how they foresee the future of that sector.

Updating of Legal Trends

Similarly, it’s essential to be aware of any proposed law or provision that could potentially influence the industries of interest or have a direct or indirect impact on our clients’ operations and businesses. This awareness equips us to assess how these reforms may affect our individual clients.

This has been especially exemplified in the recent subcontracting reform that took place in Mexico and that affected all types of companies, underscoring the importance of identifying the specific effects on particular industries or sectors, since -in some cases- such effects were transcendent and substantial.

Understanding Client’s Operations

As lawyers we are unable to provide legal solutions to our clients without taking into consideration how an industry or business sector operates. This encompasses knowing where they source their raw materials, the labor regulations they must adhere to, the target market they serve, how they allocate costs for production, in what proportions, the competitive landscape, and any challenges they face in acquiring new clients or entering new markets, among other factors. 

Our solutions need to align seamlessly with our client’s operational methods. For instance, if there is a shortage of resource that is vital to their production process, if there is a restriction in the type of specialized labor required, if there is a key supplier, this will allow us to ensure that the alternatives we propose in any given situation won’t negatively impact our client’s business.

Identification of risks and their effective communication

As advisors, it is essential to know the risks involved in the business we are entrusted with, that is, to identify which risks the client would be facing in the event of making a business or investment, and to communicate such risks quickly and clearly. This implies, beforehand, getting to know each client as to which situations and circumstances he considers as risks he is willing to assume and which he is not. 

All identified risks must be communicated. However, those that are known to be unacceptable to a client must be communicated immediately to avoid wasting resources and time.

Speaking the Language of our Clients

It is essential to be able to communicate clearly to each client the situations we face in a transactional operation and to do so in a way that is clear and in a business language. This does not imply leaving the legal aspects of a negotiation without effect, but we can and should – as expert business lawyers – have the ability to translate the complex legal language that an M&A transaction may involve into clear concepts for the benefit of our client and the negotiation.

In today’s landscape, we need to be able to offer an extra layer of value to our clients, which goes hand in hand with a profound and specialized understanding of business aspects beyond mere legal expertise. M&A transactions require legal advice with a pragmatic, business-oriented approach.

The expertise and knowledge of meta-legal aspects becomes an essential asset in offering customized legal services for the provision of adequate legal services tailored to the needs of our clients. Always keeping in mind that legality is the means, not the essence of a business.

The full article was made in collaboration with Lexlatin, and you can find the original article in Spanish herein: https://lexlatin.com/opinion/asesor-legal-ma-rol 

All the information placed in this article and the rights of distribution belongs to @Lexlatin.

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María Teresa Paillés