Due Diligence Done Right: How Legal Translations Help Close Global M&A Deals

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.

Best Practices for Legal Translation in M&A

How do you ensure that a legal translation meets the criteria of something as complex and integral to the M&A process as due diligence? Here are a few of the best practices you can implement to guarantee you are on the path to success.

1. Work with Legal Translators Specialized in M&A

Not all legal translators have experience dealing with corporate finance due diligence and M&A. That’s why it is important to make sure you collaborate with an expert in the field who has experience in the specific countries relevant to the deal. This will help ensure that all the needed information has been laid out effectively.

2. Develop Cultural Awareness

An M&A deal is the beginning of another chapter for the companies involved. The long-term success of an M&A transaction depends on how management is prepared to assimilate into the new culture. Translations during the deal process facilitate effective information sharing and therefore serve as a way for both parties to develop trust and transparency.

3. Quality Assurance and Accuracy

Many legal translation services have documents undergo a thorough quality assurance process that involves the use of state-of-the-art translation tools and human expertise to evaluate the translated documents’ clarity and accuracy. It’s also vital that, from your end, you conduct quality assurance and review documents to ensure that all the details are found in the agreement.

4. Data Security and Privacy

The pandemic didn’t just bring change to the process and practice in due diligence for M&A, but it also changed how transactions are being made. As remote work and hybrid arrangements have become prevalent and more deal closings are occurring digitally, concerns about data security and privacy protocols in place have become more significant. It is important to ensure that the platform used for sharing translations and other aspects of a transaction is secure.

Conclusion

Although according to PwC’s 26thAnnual Global CEO Survey 73% of CEOs didn’t have a positive view of global economic growth in the coming year, about 60% of them stated that they do not plan delay deals in 2023. International M&A due diligence will continue to be important, and having experts in legal translations to bridge cultural and linguistic barriers is a necessity. Businesses looking to close global deals should consider the impact of legal translations on their due diligence process and use the best practices in this article to help minimize the risks and maximize the opportunities associated with cross-border M&A transactions.