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Practitioner's Complete Guide to M&As: An All-Inclusive Reference, with Website by David T. Emott

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Topic 77

Negotiation: After the Deal Is Agreed

At last the time comes in all deals where the parties have finally agreed on all the major points and shake hands. Topic 77 explores the necessity of fully documenting the terms of the business agreements in a text that will form the backbone for drafting the legal agreements.

When agreement has been reached and the parties shake hands, be sure to take the time to orally review and document your business agreements on all the points discussed before anyone leaves. The points of agreement should be circulated shortly thereafter to all parties to the deal.

HEADS OF AGREEMENT AND WHAT TO INCLUDE IN IT

  • Prepare as long or short a document as needed to capture all the points of agreement. Initial it, date it.
  • Such document is often referred to as:
    • Heads of agreement
    • A term sheet
    • Memorandum of understanding
    • Letter of intent (binding or nonbinding) (see Topic 89)
  • Such document should include:
    • Signing date anticipated
    • Closing date anticipated
    • Legal and tax structure of the deal
      • Taxable, tax deferred; merger, acquisition
      • What is being purchased—assets, stock (see Topic 84)
      • What is transferred from what entity to what entity, how, when
      • New acquiring entities to be formed, limited liability corporation, C corporation, partnership, and so on
      • If a merger, plan of merger key terms; description of which entity merges into which entity
    • What assets and liabilities are being purchased and/or assumed or not assumed
      • Working capital level expectation ...

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