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Must-Ask Questions before a Buyer Seals an M&A Deal

Most franchisees aren't looking to buy a franchisor, although it has been known to happen, but given the frequency of mergers and acquisitions in the franchising world, it's an aspect that could soon, if it hasn't already, affect them. Here's what a buyer should be looking for in the deal, according to attorney Perry McGuire, who practices franchise and distribution law, as well as mergers and acquisitions.

Franchise mergers and acquisitions are not slowing down, and the deals range from small, like the recent acquisition of Green Home Solutions by Mosquito Shield, to the $1.3 billion tender offer purchase of Popeye's by Restaurant Brands International, the owner of Burger King and Tim Hortons.

The mergers and acquisitions of franchise companies and systems involve many special considerations that set them apart from the acquisitions of other businesses. Such businesses are more than the "sum of their parts" as franchise companies subsist on a foundation built from distinctive business attributes. These include a franchised company's intangible assets and their multi-layered and multifaceted relationships with franchisees and vendors. Often, because these intangible assets consisting of contract rights (franchise agreements) and intellectual property (trade secrets, trademarks) usually exceed the common assets of non-franchise businesses, special considerations must be addressed by a prospective purchaser prior to any merger and acquisition. — Perry J. McGuire, Esq./Smith Gambrell & Russell LLP

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About Marilee Hayes

Area of Interest
Buying a Franchise