M&A Transaction

Question 1

NDA

Answer 1

Non-disclosure agreement:

duties of confidentiality, cost and expenses…

Question 2

LOI (MOU)

Answer 2

Letter of Intent or Memorandum of understanding:

duties of confidentiality, cost and expenses…

Question 3

Due diligence

Answer 3

legal, fiscal, and financial

Question 4

Signing period

Answer 4

execution of the share purchase agreement (SPA)

Question 5

Types of process

Answer 5

Individual negotiation: bilateral discussions
formal auction: limited number of participants
informal auction: controlled wide auction.

More parties involved, more complexity, more time, risk for confidentiality

Question 6

Parts of a SPA

Answer 6

• Steps: premises, scope, transfer modalities and price (locked box mechanism, external arbitrator, earn-out clauses, escrow clauses, condition precedents).
• Covenants: parties undertake contractual obligations on what to do or not (interim covenants…)
• R&W: declarations of the parties issuing warranties (legal, business).
• Disclosure schedule: describe in details the exceptions of R&W.
• Indemnification obligations: indemnity in case of breach of R&W. Their limits are: de minimis, threshold, cap, timing and procedures, “exclusive remedy”).
• Other miscellanea provisions: clauses for the survival of the agreement…

Question 7

Initial phases of an M&A process for the advisor

Answer 7

preparation, marketing/non-binding offers, due diligence/binding offers, signing.

(6 months reasonable)

Question 8

Advisors’ compensation for an M&A process?

Answer 8

success fee
incentive fees
discretion fees
fixed component