Mergers & Acquisitions from A to Z

By Andrew J. Sherman | Go to book overview

CHAPTER 10
The Purchase Agreement and
Related Legal Documents
Once the due diligence has been completed, valuations and appraisals conducted, terms and price initially negotiated, and financing arranged, the acquisition team must work carefully with legal counsel to structure and begin the preparation of the definitive legal documentation that will memorialize the transaction. The drafting and negotiation of these documents will usually focus on the key terms of the transactions, the past history of the seller, the present condition of the business, and a description of the rules of the game for the future. They also describe the nature and scope of the seller’s representations and warranties, the terms of the seller’s indemnification of the buyer, the conditions precedent to closing of the transaction, the responsibilities of the parties during the time period between the execution of the purchase agreement and the actual closing, the terms and structure of payment, the scope of postclosing covenants regarding competition and related obligations, the deferred or contingent compensation components, and what will happen if things go awry postclosing, such as any predetermined remedies for breach of the contract.The key terms of the purchase agreement will often be dictated by four major variables:
1. The relative drafting and negotiating skill of each party’s legal counsel

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