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The anatomy of a merger agreement

On Behalf of | Jan 8, 2016 | Mergers & Acquisitions

The process of acquiring another company and merging technologies is not an easy process. But when it is done efficiently and skillfully, it can benefit both companies as well as their employees and shareholders. A number of our posts have focused on the due diligence that M&A attorneys perform in order to advise their clients on whether an acquisition will be in the company’s best interests, but this post will focus on how an acquisition agreement is crafted.

Specifically, we will highlight some prominent sections in these agreements. 

Transaction and terms of merger – This section, commonly the first part of a merger agreement, sets forth the basic terms of the union, including when the transaction (or series of transactions) will take place, and authorizations necessary for the transaction to take place.

Manner of transferring or converting shares – It is critical to a merger or acquisition for the terms of converting shares to be clearly articulated. This is because many of these transactions are based on the benefits that shareholders will enjoy.

Representations of parent and company – Both companies (the acquiring company and the company to be acquired) must make truthful representations about what their assets and liabilities going into the transaction. These may include statements of what intellectual property each company owns, any pending lawsuits or judgments that affect each company as well as any records or reports that must be kept.

Conduct of each company during the transaction – A merger agreement will also detail how each company is to conduct business during the course of the transaction. This may also include a number of positive and negative covenants that each company will agree to.