The process of investing and acquiring startups can be wildly lucrative, but at the same time wildly risky. Parties on both sides of a deal need to find the right partner, the right deal, and importantly, the right legal counsel to ensure the best options are sought and that everyone does their part to ensure success.
Legal counsel create the legal framework to make it all happen. This includes:
Structuring the deal. A well-structured deal maximizes returns while minimizing risks. At the same time, transactions must meet regulatory requirements and serve the interests of investors and partners on both sides.
Contracts. The legal governor of all investments is the documentation and contracts that outline the deal and spell out all that is expected. The legal counsel behind these investment deals drafts investor agreements, shareholder agreements, and employee contracts—all to apportion the risks and rewards, incentivize and align the parties for success, reduce the likelihood of disputes and have in place a plan of action for when disputes do arise.
Due diligence. A strong legal team helps an investor test the price and conduct thorough due diligence (and a company defend price against a thorough due diligence investigation) to identify legal risks in a deal. Issues may involve commercial contracts, intellectual property rights, regulatory compliance, past or ongoing litigation, and other legal aspects.
Risk management. Legal teams identify and mitigate potential legal risks in investment, on everything from assessing potential legal liabilities to protecting investors’ interests.
Exit strategies. Both sides of an investment are there for the same reason: reaching the point where it all pays off. A well-structured and documented deal will outline exit strategies so that when the time comes, all parties are ready with a roadmap in hand.Dispute resolution. Disputes will happen: It’s human nature and it’s why the best legal counsel is sought for investments. Strong counsel will both anticipate possible disputes and seek a favorable resolution when they occur.