M&A Documentation: Essential Agreements & Documents

Navigate the complex world of M&A documentation with expert guidance on key agreements and best practices

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Essential M&A Documents

IOI

Indication of Interest - preliminary expression of acquisition interest.

  • • Non-binding initial offer
  • • Preliminary valuation range
  • • Basic transaction structure
  • • Next steps outline
Timing: Early stage
IOI Guide
LOI

Letter of Intent - detailed non-binding agreement on key terms.

  • • Purchase price and structure
  • • Key terms and conditions
  • • Due diligence framework
  • • Exclusivity provisions
Timing: Pre-DD
LOI Guide
Term Sheet

Detailed summary of all material transaction terms and conditions.

  • • Complete deal structure
  • • Detailed pricing mechanics
  • • Representations & warranties
  • • Closing conditions
Timing: Post-DD
Term Sheet Guide
Final Agreement

Definitive merger or purchase agreement - legally binding contract.

  • • Complete legal framework
  • • All terms and conditions
  • • Binding obligations
  • • Closing mechanics
Timing: Pre-closing
Agreement Guide

M&A Documentation Timeline

Week 1-2

Initial Interest

IOI submitted to express preliminary interest and request basic information.

Week 3-4

Letter of Intent

LOI negotiated and executed, establishing key terms and due diligence framework.

Week 5-12

Due Diligence Period

Comprehensive investigation while refining terms and conditions.

Week 13-16

Final Agreement

Definitive purchase agreement negotiated, drafted, and executed.

Key Document Components

Purchase Price & Structure
  • • Base purchase price and calculation methodology
  • • Payment structure and timing
  • • Earnout provisions and metrics
  • • Working capital adjustments
  • • Escrow arrangements
  • • Tax allocation and responsibilities
Representations & Warranties
  • • Corporate organization and authority
  • • Financial statement accuracy
  • • Compliance with laws and regulations
  • • Material contracts and commitments
  • • Environmental compliance
  • • Employee and benefit matters
Closing Conditions & Covenants
  • • Regulatory approvals and consents
  • • Third-party consents and waivers
  • • Pre-closing operating covenants
  • • Financing and funding conditions
  • • Material adverse change provisions
  • • Survival periods and indemnification

Documentation Best Practices

Do's
  • • Engage experienced legal counsel early
  • • Clearly define all key terms and conditions
  • • Include comprehensive due diligence findings
  • • Structure appropriate risk allocation
  • • Plan for various contingencies
  • • Ensure regulatory compliance
  • • Maintain detailed negotiation records
  • • Allow adequate time for documentation
Don'ts
  • • Rush documentation to meet artificial deadlines
  • • Leave key terms undefined or ambiguous
  • • Ignore material due diligence findings
  • • Accept unlimited or inappropriate liability
  • • Overlook regulatory requirements
  • • Fail to plan for integration needs
  • • Neglect post-closing considerations
  • • Rely solely on standard form documents

Common Documentation Challenges

Valuation Disputes

Disagreements on valuation methodology, assumptions, and final pricing often lead to complex earnout structures.

Risk Allocation

Balancing buyer protection with seller limitations on liability and indemnification claims.

Regulatory Approvals

Complex approval processes that can delay closing and require careful condition structuring.

Integration Planning

Balancing operational continuity needs with integration requirements and timeline pressures.

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