A merger and/or acquisition (M&A) occurs when two businesses merge together, or one business acquires another business, in order to form one bigger business. The M&A process can be complex, so the two businesses should ensure that they are on the same page before they proceed with any phase of the procedures necessary to effectuate the transaction. A good way to do this is to draft a letter of intent (LOI) that sets forth each party’s expectations about the transaction. The LOI should contain the fundamental terms of the parties’ agreement, although it typically is not a binding contract at this point.
One major task for the parties is to agree on a price for the purchasing company to pay the selling company. In examining whether a proposed price is reasonable, the purchasing company must closely examine many different aspects of the company, including its sales and profits, expenses and debts, equipment and inventory, and reputation and goodwill. Engaging in this sort of due diligence is crucial to ensuring that the transaction is both reasonable and beneficial to all parties involved.
The next step is to structure the deal. The necessary provisions include how to finance or pay for the deal, which company will assume certain liabilities, how to obtain stockholder approval, and how to deal with the tax consequences. The contract also must address indemnification to cover potential breaches and liabilities, closing conditions, compliance with applicable regulations, and the implementation of restrictive covenants.
As you can see from the various issues that arise from a M&A process, these deals can very quickly become very complicated. Enlisting the assistance of an experienced business law attorney can be essential to finalizing your proposed deal. At Heit Law Group, P.C., we are dedicated to helping you build the business that you want, no matter what legal issues may arise in the context of the M & A process. We are here to assess the facts and circumstances surrounding your situation, explore all options that may be available to you, and offer you the tools that you need to handle whatever comes your way. Contact your California business lawyer today and schedule an appointment to meet with us.