The purchase agreement is key in M&A transactions, detailing conditions for closure, business terms, asset delineation, due diligence, post-closing recovery, and transition covenants. Styled based on the transaction (asset, stock, merger), it's drafted post-due diligence, varying in length. It includes parties involved, assets, liabilities, purchase price details, closing process, representations, warranties, tax matters, other covenants, indemnification, and miscellaneous provisions. Structure is driven by buyer and seller preferences, affecting asset or stock purchase decisions and tax implications.
Selling your business is not just about finding a buyer and agreeing on a price. Once the basic terms of the deal are agreed upon in a letter of intent, the buyer will want to sift through your business and legal records with a fine-tooth comb. This meticulous review of your business from contracts to customer lists is called due diligence. Due diligence allows the buyer to uncover risks when buying a business.
Due diligence is the buyer’s process of discovering and evaluating information about a seller’s business to confirm that acquiring the seller’s equity or assets is a sound investment. However, the process of conducting due diligence differs between transactions for a variety of reasons. Factors such as the deal structure (equity purchase versus asset purchase), cost, the unique qualities of the seller, and time constraints affect how the buyer’s deal team approaches due diligence.
This article discusses the memorialization of purchase offers in a letter of intent (LOI) in M&A transactions. An LOI outlines key terms of the deal but is non-binding. It includes provisions like exclusivity, confidentiality, expenses, and non-solicitation that may be binding. Careful drafting is essential to avoid potential risks. Properly considered, an LOI is a valuable tool for M&A deals, guiding parties through negotiations with caution.
This blog post discusses the importance, elements, and exceptions of non-disclosure agreements (NDAs) when selling a business. Key points include the priority for sellers to sign an NDA before disclosing sensitive information, the necessity for clear definitions of what the NDA covers, guidelines for sharing information, the term length of NDAs, and remedies in case of a breach. Despite its protection, enforcing NDAs can be challenging, advising selective information sharing.
For high-growth startups, these tax benefits are often well worth the time and brainpower spent planning and structuring for the requirements imposed by Section 1202 of the Internal Revenue Code. However, to fully take advantage of these benefits, understanding and navigating the 5-year holding period requirement under Section 1202 is essential. In this article, we’ll explore one common scenario that illustrates a key consideration with respect to the holding period from the founder’s and advisor’s perspective.