In the previous two posts in our series on legal considerations for selling an emerging growth company, we focused on providing an overview of the M&A process as well as negotiating an engagement letter with a financial adviser. In this third installment, we will take a look at drafting a Non-Disclosure Agreement (NDA) with a potential acquirer. What makes the NDA particularly significant for an emerging growth company entering into the acquisition process is that, unlike other aspects of the sales process such as due diligence or executing a letter of intent, the NDA should be drafted with a primary focus on the needs of the target company, and not the acquirer. Thus the burden lies more with you and your company in drafting an NDA that will protect your company’s intellectual property and strategies while at the same time providing a sufficient window into a company to your potential acquirer to entice them to move forward with the transaction. With those oftentimes competing interests in mind, we will take a look at the four central questions you will need to answer in drafting and finalizing a NDA.
Venture Capital Archives
Legal Considerations for Selling an Emerging Growth Company Part 2: Creating an Engagement Letter with a Financial Adviser
Last month, we began a seven-part series on “Legal Considerations for Selling an Emerging Growth Company,” and, in that post, we discussed six important steps in the merger and acquisitions process that emerging growth companies will need to prepare for, which are: (1) engaging a financial adviser; (2) entering into a non-disclosure agreement; (3) negotiating the term sheet or letter of intent; (4) due diligence; (5) drafting and negotiating definitive documents; and (6) closing. We will continue to dive deeper into each of these steps of the process, and this month we are focusing on the first step, which is negotiating an engagement letter with a financial adviser. [Read more…]
Everyone knows that a primary goal for many, if not most, startups and tech companies is to eventually sell the company, even if the founders intend to remain with the company. It goes without saying that selling your company can result in an enormous payday and provide continued vitality for the company going forward. That said, it’s critical that owners/entrepreneurs comply with legal requirements and protect their legal interests throughout the sales process to maximize their chances for a positive outcome.
With that in mind, this month I’m beginning a series of blog posts on the legal considerations you’ll need to keep in mind when selling your business. We begin with taking a look at an overview of the process involved in a merger or acquisition (often referred to as an “M&A deal”). Below is a high-level look at six essential steps to successfully completing an M&A deal, and in future posts we will dive deeper into what each one means for you. [Read more…]
For many startup founders, what led them into the risky but thrilling world of starting their own company was technology, innovation, the ability to affect the world, and the freedom of being their own boss. Learning the ins and outs of financing, attracting investors, and understanding how to comply with state and federal securities laws is probably not at the top of the list of a startup founder’s most favorite things. But, given that the vast majority of startups will rely on outside financing in their early years while they progress in stages of production and expansion, their founders are going to eventually need to do some real-world study in the basics of how raising capital works in order to grow their business while protecting their vision. [Read more…]
When advising startup clients, I frequently recommend that they subject the shares issued to their founders (as well as those issued to any equity-compensated employees and contractors) to a vesting schedule. This conversation often leads the founders to look at me as if I had just asked them to grow a second head. It’s not hard to see why they would be somewhat confused as to why I recommend this course of action. As a technical matter, usually (but not always) my client is the startup itself and not the founders personally. And while I am always very clear about this with my clients, as I must be as an attorney, my clients’ founders often see me as their adviser, at least on some instinctual level. In addition, at the early stages of a startup, before any significant investors are involved, the founders have complete control over the company. So they often ask why would they do something like subjecting their own shares to a vesting schedule that appears to be contrary to their own interests and why I would recommend that they take such an action. After all, they can only lose by subjecting their shares to a vesting schedule, right? [Read more…]