Mergers and acquisitions (M&A) play a major role in modern economies. Since 2010, there have been more than 500,000 merger and acquisition deals worldwide. According to Statista, in 2021 alone, there were more than 63,000 international M&A transactions.
Due diligence is an essential part of the M&A process. However, many obstacles can get in the way of effective due diligence, including language barriers and cultural differences. This is where legal translation steps in: this specialized field can help smooth the way to a successful transaction.
The Importance of Legal Translations in the M&A Due Diligence Process
The purpose of due diligence during an M&A transaction is to gather all the information needed about the target company to determine if a deal is viable. This allows businesses considering a merger or acquisition to pin down the potential risks and opportunities in the transaction.
Language barriers and cultural differences can complicate due diligence in international M&A transactions. Each country and region has its own legal system and regulations, so any lack of knowledge of these specific complexities can lead to a deal falling apart. Cultural differences can also bring about misunderstandings and miscommunication, which can negatively impact the overall success of the deal.
This is where legal translation services become essential. This domain of translation not only requires that translators be fluent in another language, but they must also have an in-depth understanding of the legal systems of both invested parties as well as cultural awareness and knowledge of specific legal jargon.
Legal translations are crucial in ensuring that cross-border transactions are free of any miscommunication and misunderstandings; certified translation of any foreign-language documentation involved in the process can ensure that the language barrier won’t be a reason a deal is not successful.
Translating contracts and agreements ensures that both parties are on the same page and that their obligations, rights, and liabilities are all properly met. By translating financial statements, parties can have a detailed analysis of the target company’s financial performance, which is critical in determining the deal’s viability.
Despite the rise of AI translation software, it is essential to have language professionals who are specialized in legal translations as part of the process, as there are aspects of law and linguistic nuances that machine translation is not able to reliably convey. Language professionals can also be held responsible if any aspect of the translation goes awry.