We are almost at the end of our 7-part series on selling an emerging growth company, and we have reached the stage of drafting and negotiating the definitive agreement. When we talk about the “definitive agreement” in the context of a sale of an emerging growth company, this usually refers to an asset purchase or stock purchase agreement as part of an acquisition, but when there is a true merger of the acquirer and target, the definitive agreement will be the merger agreement. The actual drafting and negotiating done by your attorney and your acquirer’s attorneys may not be all that exciting, but, for you, the owner of the target (which I’ll refer to in this post as the seller), this means you are hopefully well on your way to a successful closing.
But before a definitive agreement can be finalized, there are numerous, often challenging issues to be worked out between the acquirer and seller regarding 1) the economics of the transactions; 2) representations and warranties made by the seller; and 3) what rights the acquirer will have if it is determined the representations and warranties were untrue in any way. [Read more…]