Business-Minded Legal Solutions

Unique issues can arise when tech companies merge

A merger or acquisition deal can result in growth for the acquiring business and a financial payout for the entrepreneurs behind the acquired assets. Tech sector business leaders in these deals face unique challenge.

Four examples include:

  1. Due diligence. It can be particularly difficult to conduct full due diligence of a target business when the business operates in the tech industry. Business leaders may find themselves considering acquisition of a new, untested operation, particular expertise may be needed to test products and code, and estimates of the cost to scale up production can be more difficult than in more traditional business sectors. Some experts recommend balancing out the lack of a time-tested product by delving into whether or not the target business is really cutting edge and determining whether the desired product is actually scalable.
  2. Loyalty. The very thing that can make tech companies so successful can make acquisitions particularly difficult. Patrons are often fiercely loyal to their tech. As a result, business leaders should carefully consider the impact any changes to the acquired asset would have on customer relationships.
  3. Workforce. Tech companies often thrive due to the contributions of individuals within the development team. Carefully review the contributions of team members and make sure the right people are incetivized to remain in the workforce after the merger is complete.
  4. Compliance. Certain industries within the tech sector are highly regulated. Tech companies that operate in the health care industry or financial sectors, for example, must follow applicable regulations or will face penalties. Business leaders are wise to account for these rules if the merger results in an expansion into one of these industries.

Additional federal and local regulations can impact the transaction itself. An attorney experienced in tech acquisitions and divestitures deals can review your goals and help to better ensure a successful purchase and sale transaction.