FREE online courses on Mergers & Acquisitions - Chapter 2 - M & A Agreement

 

As the negotiations continue, both companies will conduct extensive Phase II Due Diligence in an effort to identify issues that must be resolved for a successful merger. If significant issues can be resolved and both companies are convinced that a merger will be beneficial, then a formal merger and acquisition agreement will be formulated.

 

The basic outline for the M & A Agreement is rooted in the Letter of Intent. However, Phase II Due Diligence will uncover several additional issues not covered in the Letter of Intent. Consequently, the M & A Agreement can be very lengthy based on the issues exposed through Phase II Due Diligence.

 

Additionally, both companies need to agree on the integration process. For example, a Transition Service Agreement is executed to cover certain types of services, such as payroll. The Target Company continues to handle payroll up through a certain date and once the integration process is complete, the acquiring company takes over payroll responsibilities. The Transition Service Agreement will specify the types of services, timeframes, and fees associated with the integration process.