Choosing the structure
Mergers and acquisitions take a few basic forms. A buyer can purchase assets, purchase the equity of the target, or combine the companies by merger under state corporate law, and each route moves contracts, employees, permits, and liabilities differently. Asset deals let a buyer leave many liabilities behind, although some, including certain tax and environmental obligations, can follow the business anyway under successor liability rules. Equity purchases and mergers keep the company intact, which helps with contracts and licenses but brings its past along. Tax treatment often drives the choice as much as legal risk does.
Turning findings into protection
Diligence is useful only if what it finds is reflected in the agreement. Representations and warranties describe the target as the seller says it is, indemnification decides who pays if that description proves wrong, and caps, baskets, and survival periods set the limits. Many deals now use representation and warranty insurance, which moves some of that risk to an insurer but excludes issues that were already known. Closing conditions can address third-party consents, regulatory approvals, and arrangements with key employees. Where a deal is large enough, a premerger notification to the federal antitrust agencies may be required before closing.
Planning for the day after closing
Integration problems are frequently legal problems: contracts that cannot be assigned, employees whose terms differ from yours, benefit plans that do not fit together, and data that cannot simply be combined. We prefer to discuss integration while the agreement is still being negotiated, because transition services, consents, and employee terms are easier to obtain before signing than after. In an initial meeting we look at the target, the structure under consideration, the financing, and the timeline. We then identify the issues that could change the price or stop the deal, and those issues set the order of the work that follows. Financing and the buyer's own approvals should be addressed early as well, since sellers will press for certainty that the buyer can close.
