If you’re negotiating a merger or acquisition transaction with another company, there are serious considerations that need attention up front. The buyer company and the seller company – which we’ll call the “target” company here – need to consider important legal issues.
Deal structure options include:
An “escrow” account is a special account set up by attorneys to hold transaction funds until the date that the transaction actually closes. (If the term sounds familiar, it may be because you probably worked with an escrow account if you’ve ever bought or sold a house.) It generally protects the buyer company in the event there are breaches of contract by the target company.
“Representations and warranties” are just another way of saying that, in advance of the transaction, the two companies must share vital information about the transaction and about themselves, such as their financial and legal standing. The buyer company typically wants the target company to agree to provide detailed information on issues such as:
These clauses prohibit both the buyer and target companies from: