When a company decides to sell, they have to conduct due diligence on the prospective buyer. This could be a lengthy procedure that involves reviewing financial statements, talking to employees and touring facilities. During this time it is vital that the company does everything possible to maximize the value of the deal. The M&A checklist can be a helpful tool for companies seeking to make a deal.
A term sheet, also known as a letter of intent or memorandum of understanding, is the earliest step in an M&A transaction. It lays out the commercial terms for the deal. These are legally binding documents and If there isn’t enough clarity in writing or execution this could lead to problems down the road.
Purchase Agreement and Letter of Intent
The next step of the process of M&A is to draw up the definitive purchase contract. It is a legal document that lays out the conditions of the transaction, and is signed by both parties to agree to the M&A process. The M&A procedure is followed by due diligence, which includes conducting a review of financial records within an environment that is secure.
Under the Hart-Scott-Rodino Antitrust Improvements Act, M&A transactions that meet certain criteria are required to be notified in the initial phase of premerger with the Federal Trade Commission and Department of Justice before closing the transaction. This is to ensure that the merger does not have an adverse effect on competition in the relevant markets.