Road map for a merger

What to do first if you're thinking of merging your company with another.

Michael Pruet, Birmingham, Ala.
I want to merge my accounting firm with another firm. Where do I start? What should I be asking? What does the final structure look like? How do I do it? Will I need a lawyer?

By Shara Rutberg, Fortune Small Business contributor
Dear Michael: Start by finding some good advisors, says Jason Brauser, a corporate attorney in the Portland office of Stoel Rives and past chair of the executive committee of the business law section of the Oregon State Bar.

“Yes, you should have an attorney, but as you begin thinking about merging you should also talk to people such as an investment consultant and someone from a business valuation firm,” he says. They can help you set realistic expectations from the outset.

Your lawyer can help you determine what type of merger would be in your best interest. “They can help you answer questions such as: Should I do pure merger or a statutory merger? Should I just sell my assets? Should I close up shop and transfer my people?” says Suzanne Saxman a partner in the Chicago office of Seyfarth Shaw and vice chair of the middle market and small-business Committee of the business section of the American Bar Association. “There are so many ways to do it."

It’s a good idea to create a term sheet to review with the owners of the company you plan to acquire or merge with. A single document that spells out issues such as goals, timing and payment plans “can be a meeting of the minds to determine whether there is enough agreement between parties to go forward,” says Saxman.

“In a service firm, the biggest assets are the employees, the talent,” adds Brauser. “You want to make sure you’re in agreement about the terms in which they will be transferred and how they will be treated."

The final structure will most likely be an LLC or an LLP, says Saxman. Reaching that final structure might take longer than you bargained for. “The biggest misperception among small-business owners entering mergers is that they’ll be complete within 10 to 20 days,” he says. Depending on the companies, 60-90 days is more realistic.

This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.

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