Merger and Acquisitions, Part One – Structuring the Transaction
Posted by Securities Attorney Laura Anthony | April 26, 2011 Tags: , , , , , ,

Mergers and acquisitions come in all sizes, financially speaking, but the sequence of events preceding the transaction is usually fixed. The same procedural points must be addressed regardless of the size of the subject Companies.

Confidentiality Agreement

Generally the first step in an M&A deal is executing a confidentiality agreement and letter of intent (LOI). These documents can be combined or separate. If the parties are exchanging information prior to reaching the letter of intent stage of a potential transaction, they should proceed with execution of a confidentiality agreement right away.

In addition to requiring that both parties keep information confidential, a confidentiality agreement sets forth important parameters on the use of information. For instance, a reporting entity may have disclosure obligations in association with the initial negotiations for a transaction, which would need to be exempted from the confidentiality provisions. Moreover, a confidentiality agreement may contain other provisions unrelated to confidentiality such as a prohibition against solicitation of customers or employees (non-competition) and other restrictive covenants. Standstill and exclusivity provisions may also be included, especially where the confidentiality agreement is separate from the letter of intent.

Letter of Intent (LOI)

Next is the letter of intent (“LOI”). An LOI is generally non-binding and spells out the broad parameters of the transaction. The LOI helps identify and resolve key issues in the negotiation process and hopefully narrows down outstanding issues prior to spending the time and money drafting the transaction contracts and supporting documents. Among other key points, the LOI may set the price or price range, the parameters of due diligence, necessary pre-deal recapitalizations, confidentiality, exclusivity, and time frames for completing each step in the process. It is always highly advisable that an LOI be executed.

The “Who Do” List

Along with an LOI, the parties attorney’s should prepare a “to do” list including a “who do” identification. Setting out a to do list and clarifying who is responsible for what documents and items will help move things along and avoid misunderstandings among the professionals representing the different parties to the transaction.

The next step in the transaction process is due diligence. Although generally the client is responsible for putting together due diligence items, the attorney should correlate and organize the items to ultimately save time and keep the items organized. Prior to exchanging documents the attorneys should be sure that a confidentiality agreement has been executed, either separately or as part of the LOI.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

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