Strictly Business

A Business Law Blog for Entrepreneurs, Startups, Venture Capital, and the Private Fund Industry.

Mergers & Acquisitions

Legal Considerations for Selling Your Emerging Growth Company Part 7: The Closing

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businessman selling growth We’ve come to the end of our 7-part series on selling an emerging growth company, and now it’s time to seal the deal. The closing is the crucial final step in the sale, where ownership of your company officially changes hands.

The actual closing is a fairly straightforward affair, and not unlike the closing of a real estate purchase. Two main things will happen. First, the finalized deal documents, signed by all relevant parties, are exchanged. The signing may take place at the closing, but in some instances, the documents may be signed ahead of time. Second, the buyer pays the agreed purchase price to the seller. Once these two things are done, the business officially belongs to the buyer. [Read more…]

Legal Considerations for Selling Your Emerging Growth Company Part 6: Negotiating the Definitive Agreement

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person signing definitive agreementWe 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. [Read more…]

Legal Considerations for Selling Your Emerging Growth Company Part 5: The Due Diligence Process

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Business People Shaking Hands over the due diligence processThe phrase “due diligence” comes up in a wide variety of contexts in our culture and can mean anything from the reasonable type of preparation research a person does before making any kind of decision (“I did my due diligence on Yelp before making Valentine’s Day reservations”) to the specific “due diligence defense” an underwriter can present when sued for securities violations following an IPO gone bad. In the context of the sale of an emerging growth company, the due diligence process involves the potential buyer going through the records of the target company to see whether it is actually worth what the buyer hopes it is worth and to determining whether there are potential risks that would warrant not going forward with the deal.

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Legal Considerations for Selling Your Emerging Growth Company Part 4: The Term Sheet or Letter of Intent

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A close up of a 'Letter of Intent'.If you have been following our series on the major legal steps involved in selling an emerging growth company, you know that we have already come a long way in negotiating an agreement with a financial adviser as well as entering into a non-disclosure agreement with your potential buyer. You probably would not have gotten this far in an actual deal without at least talking about the actual terms of the potential deal with the would-be buyer, but at this point it is finally time to get some of those terms on paper, even if that paper is less than legally binding and the terms remain subject to change based on the due diligence that will be conducted by the buyer. It is at this point that you and the buyer will work toward either a term sheet or letter of intent providing the preliminary framework for a potential sale of your business.

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Legal Considerations for Selling Your Emerging Growth Company Part 3: The Non-Disclosure Agreement

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hand putting a coin in jar, saving moneyIn 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.

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