An Overview of an M&A Deal: Scope and Considerations

Jacob W. Stasny, Of Counsel
Sumner, Schick & Pace, LLP

AND

Clyde Tinnen, Partner
Withers Bergman LLP

Understanding the Buyer-Seller Dynamic; information asymmetry and risk allocation

Pre-Transaction Planning

• Key players:
  • Attorney
    • Defining the attorney’s role
• Accountant
• Broker/finder/lead agent
• Investment banker
• Financial consultant
• Escrow agent
  • Caution against allowing party counsel to act as escrow agent
• Pre-deal considerations:
  • Best practices of buyers and sellers before the deal
  • Preferred jurisdictions for buyers and sellers
• Nondisclosure Agreement
  • Timing
  • Key terms/best practices
• Letter of Intent
  • Timing
  • Key terms
  • Binding v. non-binding
  • Short-form v. long-form
  • Modifying the LOI
• Due Diligence
  • Buyer due diligence
  • Seller due diligence
  • Diligence pitfalls

Architecture of a definitive acquisition agreement

• Introductory provisions — names of parties, recitals, definitions
• Description of what is being sold (especially important in asset acquisitions); and, in asset acquisitions, description of what liabilities are being assumed
• Purchase price; payment of purchase price; and, in asset acquisitions, allocation of purchase price
• Sellers' (or target company's) representations and warranties
• Acquirer's representations and warranties
• Sellers' (or target company's) pre-closing covenants
• Acquirer's pre-closing covenants
• Closing
  • When and where
  • Conditions precedent to sellers' (or target company's) obligation to close
  • Conditions precedent to acquirer's obligation to close
  • Deliveries at closing
    • by sellers (or target company)
    • by acquirer
• Termination of agreement
• Indemnification provisions
  • In favor of acquirer
  • In favor of sellers (or target company)
  • Time limitations on asserting claims for indemnification
  • Monetary thresholds and limitations on indemnification claims
  • Procedural issues with respect to indemnification claims (including provisions relating to defense of third-party claims)
• Other post-closing covenants of the parties
• General or "miscellaneous" provisions

• Liability considerations
  • Indemnification & exculpatory provisions
  • Escrow arrangements
  • Representation and warranty insurance
• Fiduciary duties
  • Common law duties
  • Contractual creation, termination, and modification of fiduciary duties
• Compliance issues
  • Pre-deal considerations
  • Public v. private equity
  • Registration and disclosure requirements under 1933 act, and exemptions
  • SEC/Finra/other banking or finance regulatory authorities
  • Council on Foreign Investments in the United States (CFIUS)
  • Hart Scot Rodino (HSR) filings
  • Third party consent (contractual and governmental)