3 Key Legal Strategies for a Successful Merger or Acquisition

2024 has the potential to be a significant year for merger and acquisition (M&A) transactions, according to a recent report by S&P Global which indicates that merger activity is heating up.

Having recently completed two major acquisitions valued at over $5 billion, the legal team at Hilton Grand Vacations (HGV) has a unique perspective on the complex landscape of mergers that goes beyond the financial metrics—including potential impacts on brand reputation, stakeholders, and overall business strategy.

When HGV acquired Diamond Resorts International in August 2021, followed by the acquisition of Bluegreen Vacations in January of this year, the HGV legal team worked diligently to ensure a seamless closing and—perhaps more important—a smooth integration.

In approaching both transactions, the HGV team focused on three key steps to facilitate a successful acquisition and integration process:

1. Conduct a robust and inclusive evaluation. 

It’s imperative for any company that may want to take part in a hot M&A market to approach potential deals with additional care and precision. Taking the right steps ahead of time can help ensure a smooth acquisition, and can positively impact the return on investment.

In order to be successful, it’s critically important to clearly articulate the fundamental rationale or strategic justification behind a business acquisition or investment. Executive teams have a fiduciary duty to their stockholders and team members to deliberate on how an acquisition could affect their brand reputation, employees, investors, customers, and other key stakeholders.

The first and most important step in any acquisition process is to conduct thorough due diligence of the target company’s financial performance, market position, assets, liabilities, key third-party relationships, and overall business operations. Through this evaluation, the acquirer can identify synergies and growth opportunities; uncover hidden issues that could affect the deal’s viability; evaluate the target’s compatibility with its own business strategy; and, importantly, determine the value and potential return on investment (ROI) of the acquisition.

During this phase, key departments throughout the company will review contracts, financial statements, litigation history, and more, while ensuring compliance with applicable regulatory requirements. Making well-informed decisions during the evaluation phase not only mitigates the chances of costly mistakes, but also ensures that the acquisition aligns with the objectives of the acquiring company for a more successful and sustainable integration that delivers greater value to stockholders. 

2. Understand what makes each company unique.

The process of merging two companies can be challenging due to the inevitable differences in their operations, culture, and market dynamics. At the most basic level, two compatible companies merge because their individual strengths are stronger together. However, it is critical for M&A teams to first identify what makes each company distinct to determine the best path forward.

The intricacies of the target company’s operations, culture, and market dynamics can be significantly different than that of the acquiring company. In order to smoothly integrate the two entities—and understand which facets of the target company are beneficial to keep after the merger—it is important for the acquiring company to have a deep understanding of these differences. Furthermore, legal counsel must be familiar with the unique aspects of both the acquiring company and the target company in order to guide the acquisition process and lay the foundation for logistical details that may have been overlooked.

In the case of Hilton Grand Vacations’ acquisitions of Diamond Resorts and Bluegreen Vacations, both companies had exceptional resort destinations and markets that complemented HGV’s portfolio of properties. The acquisition of Bluegreen Vacations also brought new partnerships with first-rate brands Bass Pro Shops and NASCAR, which provide new opportunities to expand the HGV Ultimate Access experiential events platform. The HGV Ultimate Access program offers members access to thousands of exclusive dinners, private concerts, and exciting sporting events each year. It is a cornerstone of the HGV brand and a top priority for the company’s future growth. Acquiring Bluegreen Vacations enables HGV to expand this popular and unique offering, providing value to the company, its stakeholders, and members, all at once.

3. Invest in integration.

The integration process is a critical component of any acquisition, involving the alignment of operations, systems, and cultures to create a unified and efficient organization, setting the foundation for unlocking the full value and potential of the combined entity. It is especially crucial to review the existing contracts, agreements, and obligations of both companies and ensure they align with the post-merger structure, so that legal considerations factor into the organizational integration strategy.

To be sure, integration is a lengthy but necessary process to help employees understand their responsibilities, start training immediately, and create a bond across the company. By developing and executing immediate action plans, the acquiring company is better positioned to ensure the newly integrated organization comes out of the transaction unified and stronger than ever while delivering greater value to all stakeholders.

With the right strategies, a seamless merger (if there really is such a thing) becomes worth the investment, leaving both organizations more competitive and poised for a brighter future. Conducting careful evaluation, finding what makes the companies different, and prioritizing the integration process can make all the difference between a merger that stumbles and one that soars. By understanding and addressing the unique challenges that come with combining two entities, companies can unlock true potential in their industry and cultivate a sense of unity that leads to long-term success.

Charles R. Corbin serves as executive vice president, chief legal officer, and general counsel at Hilton Grand Vacations. He previously served as senior vice president for dispute resolution and employment & benefits at Hilton.

From: Corporate Counsel