Front-End Documents in M&A: Drafting Letters of Intent, Exclusivity and Confidentiality Agreements

Description

Negotiating an M&A transaction is time consuming and costly for both the buyer and seller and can be disruptive to the seller's management of its daily operations. An LOI allows the parties to initially confirm there are no "deal-breaker" issues and determine whether there is a basic agreement on key terms.

The LOI should address the proposed structure of the transaction (i.e., stock sale, merger, asset sale), purchase price, and form and timing of payment (i.e., cash, stock of the buyer, seller note), indemnification provisions, key closing conditions, and how transaction expenses will be allocated between the parties, among other terms. The ABA model form offers a good starting point for negotiation.

Before proceeding with due diligence and drafting definitive agreements, the seller will want assurances that the information it provides will remain confidential. The buyer will want to know that the seller deals only with the buyer until the transaction is concluded. Confidentiality and exclusivity agreements can be complex; the ABA model forms are instructive as to the critical terms to consider.

Listen as our authoritative panel discusses LOIs, confidentiality agreements, and exclusivity agreements and the role of each in facilitating due diligence and final agreement to the M&A transaction.