Merger, acquisition, and Joint Venture Agreements

 

The Merger Agreement or Acquisition Agreement

 

The definitive merger agreement is the contract that governs the terms and conditions that binds the parties in a merger or acquisition transaction where one company combine its business with one or more other companies through a sale of the company. Sample agreements are shown below.

 

The principal segments of a typical agreement for the sale of a business include:

 

(1) Introductory material (i.e., opening paragraph and recitals);
(2) The price and mechanics of the business combination;
(3) Representations and warranties of the buyer and seller;
(4) Covenants of the buyer and seller;
(5) Conditions to closing;
(6) Indemnification;
(7) Termination procedures and remedies; and
(8) Miscellaneous (boilerplate) clauses.

 

There are many basic legal and business considerations for the draftsman involved in the preparation of agreements for the sale of a business. These include federal income taxes; state sales, use and transfer taxes; federal and state environmental laws; federal and state securities laws; the accounting treatment (pooling or purchase); state takeover laws; problems involving minority shareholders; the purchaser's liability for the seller's debts and contingent liabilities; insolvency and creditors' rights laws; problems in transferring assets (mechanical and otherwise); state corporation laws; stock exchange rules; pension, profit-sharing and other employee benefit plans; antitrust laws; foreign laws; employment, consulting and non-compete agreements; union contacts and other labor considerations; the purchaser's security for breach of representations and warranties; insurance; and a myriad of other considerations.

There are three basic forms of business acquisitions:

 

    i.   Statutory business combinations (e.g., mergers, consolidations and share exchanges);

    ii.   Purchases of shares; and

    iii.   Purchases of assets.

 

Joint Venture Agreement, Licensing, and Strategic Alliance Agreement

 

The joint venture agreement or strategic alliance agreement should be outlined in a formal document that sets out what each party expects to bring to the alliance. There are two approaches to the agreement. The approach that fits your company probably will depend on your company’s size, your partner’s size, how long you’ve been in business, and the type of product or service being offered through the alliance.

    • Loosely defined agreements. "Young" or small businesses may prefer to have an agreement that is broad and loosely defined to allow the partnership to grow in new directions as their business evolves.
    • Tightly defined agreements. Larger or older businesses, or those in evolving technology fields, may fare better with an agreement that spells out the precise scope of the alliance and all the details of how it will be accomplished.

Whichever type of agreement fits your business, all agreements should include:

    • your common goal
    • a strategy to define the role of each partner to accomplish that goal
    • the parameters of working toward that common goal.

A tightly defined agreement may also:

    • identify key steps that each partner will take to meet the requirements of the agreement
    • include a time frame for achieving those key steps
    • outline each partner’s accountability by including consequences for "worst-case scenarios" such as missed deadlines, budget overruns, or products not delivered as promised or in the format expected
    • provide a framework for resolving conflicts if they occur.  

 

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Merger Agreement & Joint Venture Agreement Templates

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Asset Purchase & Sale Agreement- DEF01

Stock Purchase & Sale Agreement: Common Stock, Shorter Version- DEF02

Stock Purchase & Sale Agreement: Common Stock, Longer Version- DEF11

Stock Purchase & Sale Agreement: Preferred Stock, Longer Version- DEF12

Distribution Agreement - DEF03

Exclusive License Agreement - DEF04

Joint Venture Agreement - DEF05

Marketing & Sales Only Joint Venture Agreement - DEF06

License Technology In Exchange For Stock Agreement - DEF13

Partnership Agreement - DEF07

Promissory Note - DEF08

Non-Disclosure Agreement : DEF09

Shareholder Agreement - DEF10

 

 

 

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Download Additional Agreement and Term Sheet Templates
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Distributor Agreement Joint Venture Agreement Stock Purchase and Sale Agreement Acquisition Confidentiality Agreement
Merger Agreement -1 Merger Agreement -2 Merger Agreement -3 Merger Agreement -4 ADDITIONAL TEMPLATES
Letter of Intent to Purchase Business Letter of Intent to Joint Venture Basics of Buying or Selling a Business Presentation and Report Charts and Graphics - Big Time Saver! FINANCIAL BENCHMARKS DATA

 

 

Term Sheet/Letter of Intent

 

The Term Sheet or LOI, which precedes the Definitive Agreement, is a confidential document, usually prepared by the buyer or investor, which outlines in general terms the purchase or investment agreement between the parties.  All of the following are the same thing: term sheet, memorandum of understanding (MOU), letter of intent (LOI), heads of agreement, deal points, etc.

 

Most of the time it is not a legally binding commitment to buy, sell, or invest. However, certain provisions such as confidentiality stand still and payment of consultants during the diligence period should be and usually are binding. I refer to the LOI as a “handshake in writing.  

The main purpose is to assure that the parties agree on the general terms of the deal before starting due diligence. Without the terms written, the parties will expose themselves to crucial ambiguities and omissions.  

 

It should identify and confirm agreement on all significant issues of the potential transaction. The following is my basic checklist:  

 

  •  What’s being sold? Is it a stock sale, an asset sale, or equity interest? What specific items are included are included or excluded?
  • The price including security instruments and other money issues. This defines all consideration that will potentially change hands as a result of the transaction. This includes, purchase price, investment capital, consulting agreements, non-compete agreements, employment agreements, royalty agreements earn-outs and any other such agreement.

    It is usually a good idea to make the latest published Balance Sheet as the base price document and adjust the purchase price at closing to reflect any gains or losses to that Balance Sheet. This is fair; the Seller gets credit for profits or losses all the way to the actual closing.
  • Terms. Will it be all cash at closing or will there be financing. The LOI also describes what security agreements are to be created for any future payments.
    If there is third party financing ahead of seller financing, The LOI should include the seller’s right to approve such financing and establish a date for a financing commitment to be in place from the third party.
  • The payment provisions. These define how and when the payments take place.
  • The allocation of the price to the various layers of the deal.  (For example, what is the value of the Non-Compete Agreement and how much of the purchase price is allocated to it.) This is often postponed until later with the proviso that the parties will agree to allocations such as to minimize taxes on the deal. Putting off is bad. Since tax issues that benefit one party many hurt the other, later negotiation is not a good deal. I insist with my clients that allocations are agreed on up front and included in the LOI.

    Allocation is key to minimizing taxes and should be reviewed with your accountant and financial planner prior to signing the LOI.
  • A definition of what is being sold and what is not. List the categories of items. A good place to start is the current balance sheet and list exceptions or add-ons as appropriate.
  • Work to be done by consultants and advisors before a Definitive Agreement is signed and who pays for that work. Many times the buyer and sell will spend significant sums during the due diligence period on outside advisors.
  • Definition of which party is responsible for drafting the Definitive Agreement. In my experience, the buyer or investor’s lawyer usually does this. The LOI should have a target date for the completion of the definitive.

Click Add to Cart to Buy Each Document - Annual Membership Not Required. Download files immediately after purchase.

 

Term Sheet/Letter of Intent Template

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Asset Purchase - M&A01

Asset Purchase - M&A02

Stock For Cash & Stock Purchase - M&A03

Stock For Cash Purchase - M&A04

Stock for Stock Purchase - M&A05

Earnout Purchase - M&A06

Joint Venture - M&A07

Product Distribution - M&A08

Product License - M&A09

Technology Development - M&A10

Series A Preferred - M&A11

Series B Preferred - M&A12

 

 


Download Additional Amazing Deal Agreement and Term Sheet Templates For

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 Other Templates File Description
Exclusive License Agreement - Sample 1 Template to develop an exclusive license agreement with royalties between two parties (Word Document)
Exclusive License Agreement - Sample 2 Another template to develop an exclusive license agreement with royalties between two parties (Word Document)
Exclusive License Agreement - Sample 3 Another template to develop an exclusive license agreement with royalties between two parties (Word Document)
Non-Exclusive License Agreement Template to develop a non-exclusive license agreement with royalties between two parties (Word Document)
Agreement For Joint Technology Development, Licensing - Sample 1 Template to develop a comprehensive joint technology development, licensing, and marketing agreement between parties (Word Document)
Agreement For Joint Technology Development, Licensing - Sample 2 Another template to develop a comprehensive joint technology development, licensing, and marketing agreement between parties (Word Document)
Collaborative Research Agreement Template agreement to develop the term and conditions for collaborative research between parties (Word Document)
Joint Marketing Agreement - Sample 1 Template to develop a joint marketing and distribution agreement with compensation between two parties (Word Document)
Joint Marketing Agreement - Sample 2 Another template to develop a joint marketing and distribution agreement with compensation between two parties (Word Document)
How To Prepare A Business For Sale Step-by-step action plan on the specific tactics of what you need to do prepare your business for a successful sale with the highest potential value (Word Document)
Offering Memorandum or Sales Prospectus A document describing your business, its prospects, and why a potential purchaser should buy it.
Presentation for Approval to Buy/Sell a Business Provides the presentation framework and details needed to get a business sale or purchase approved by the board or other senior executives.
Transitioning Your Company Through A Sale Or Merger Presentation template with the step-by-step issues to be faced and processes involved as a company and the owners go through a business sale or merger. The step-by-step process is complete in that it starts from the first call/meeting and goes beyond post merger/acquisition integration (PowerPoint Document)

 

 

 

 

 

 

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