A legal blog on private funds, startups, and venture capital.
A legal blog on private funds, startups, and venture capital.
Earnouts can bridge valuation gaps in M&A deals, but careful drafting is crucial. Sellers should negotiate clear calculation methodologies, specific covenants for the buyer's post-closing operation of the business, and robust dispute resolution procedures. Proper structuring of earnout provisions can help manage seller expectations and reduce the likelihood of future disputes.
On January 1, 2024, previously enacted federal legislation called the Corporate Transparency Act (the “CTA”) went into effect. The CTA aims to assist law enforcement in tackling money laundering, tax fraud, terrorism financing, and various other illicit activities facilitated by…
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.
