Technology and Telecom M&A Transactions
Posted November 11, 2017 in Articles
Key Considerations in Technology and Telecom M&A Transactions
Investing through acquisition requires thorough preparation and attention to detail during the deal-making process. Rush into a deal and you may find that the potential return is not as great as you anticipated. Focus only on the big picture and you are likely to discover that the terms of the deal leave your company unduly and dangerously exposed.
While these are important considerations for merger and acquisition transactions in all industries, in technology and telecom, they often take on heightened importance. Here are five key aspects of technology and telecom deals that can drastically impact the value of the investment:
1. Due Diligence
From regulatory compliance issues to pending civil litigation, executives who are contemplating M&A transactions must have a clear picture of the actual and potential risks involved. This requires careful due diligence with a critical eye toward a variety of issues that are unique to the technology and telecom industries.
2. Intellectual Property (IP) Rights
From patent expiration to third-party licensing issues, understanding the value of a company’s IP portfolio requires more than a cursory assessment of active and pending registrations. A carefully-protected patent with a long shelf life can represent enormous economic potential, while a reckless licensing program can erode the value of an otherwise-attractive portfolio.
3. Transition and Integration
How will the target company’s customers respond to the acquisition? Will your operations be able to manage the additional volume? In large-scale transactions, it is common for acquiring companies to receive transition and integration assistance for a specified period of time, and the value of this assistance is highly dependent upon the specificity of the relevant terms negotiated into the deal.
4. Contract Assignment and Rejection
Do the target company’s customers or vendors have the right to reject their contracts in the event of an acquisition? What steps are required in order to assume these contracts, effective day one? These are questions that should be answered early in the acquisition process so that any challenges can be addressed prior to closing.
5. Liability and Indemnification
Whether due to customer service issues, IP infringement claims or other sources of potential litigation, acquiring companies can face a number of liability risks stemming from the target entity’s market activities ahead of the deal. In order to mitigate this risk and shift liability appropriately, acquisition agreements should typically include adequate provisions for indemnification, insurance and other forms of liability protection.
Of course, this list is not exhaustive, and the particular risks involved in any one deal will depend on the unique economic, legal and practical issues at hand. In technology and telecom M&A deals, having access to complete information is critical to success, and this starts with gaining an understanding the types of potential concerns that are on the table.
Speak With a Technology and Telecom M&A Consultant at Mithras Investments
If you need help assessing the potential risks involved in a technology or telecom acquisition, we can help. Mithras Investments is a global consulting firm that represents companies of all sizes in complex M&A transactions worldwide. To request more information, please call our offices at, please call (305) 517-7911 or inquire online today.