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A merger and acquisition refers to the merging or acquisition of two businesses. The aim is to gain market share or increase profitability through access to new technologies, products or markets.

The M&A process is extremely complex and usually involves significant legal regulatory, tax and other issues to take into consideration. In a typical transaction, the parties first decide on the structure of the deal, such as whether they want to acquire assets or shares and in what shape. This will impact virtually every aspect of the subsequent acquisition agreement. In certain circumstances, it may be necessary to consider taking steps data room M&A prior to the sale, for instance, isolating Target assets into a corporation which shares can then be purchased.

After this initial step has been completed, the next step is due diligence, which is a deep examination of the target’s essential information, including financial, commercial and operational data. This is the longest element of an M&A. A thorough due diligence exercise can help buyers understand the risks and benefits that come with a proposed transaction. It can also uncover unintentional or unexpected liabilities that could force the buyer to negotiate a revision of the price, indemnities or terms to the purchase agreement.

After conducting due diligence, the parties typically draft the document known as a letter of intent (or term sheet, or a ‘heads’ of terms, or ‘heads’ of agreement) that outlines the main aspects of the agreement including the timing. The document will typically contain a “representations and warranties’ section where each party confirms the truthfulness of the information they have provided during negotiations. This is designed to decrease the chance of miscommunications or incorrect interpretations that could lead costly legal disputes after completion of the deal.

The term sheet will contain the commitment of each party to keep confidential information throughout the M&A transaction. This is essential for preventing sensitive and confidential business information from being divulged to competitors or other interested parties until the transaction is fully completed. M&A lawyers can assist in the creation of complete confidentiality agreements which are binding on both parties.

The final step is the signing of an agreement that confirms the terms and timing of the M&A transaction. This is often referred to by the terms ‘purchase agreement or ‘acquisition contract’. The final agreement will typically be subject to specific closing conditions, such as the successful completion of all financial and legal due diligence and obtaining necessary regulatory approvals. M&A lawyers can assist in negotiating the terms and ensure that the agreement is legally binding if there is a breach or dispute.