A merger or acquisition is the most complex transaction most businesses ever do. The legal structure decides what changes hands and who carries the historic risk, and the path from agreed price to completed deal runs through diligence, negotiation and a set of conditions. This is a practical walk through it for first-time founders and acquirers.
In a share deal, the buyer acquires the company itself, and with it everything the company owns and owes, including liabilities it may not yet know about. In an asset deal, the buyer cherry-picks specific assets and usually leaves the liabilities behind. Sellers typically prefer a clean share sale; buyers often prefer the control of an asset deal. The choice drives the tax, the risk and the complexity of the whole transaction.
The headline price is rarely the whole story. Earn-outs make part of the price contingent on future performance. Escrows hold back part of the price to cover warranty claims. Working-capital adjustments true up the price for the actual position at completion. Each of these is a mechanism for sharing risk between buyer and seller, and each needs careful drafting because each is a frequent source of post-deal dispute.
Warranties are statements about the business that, if untrue, give the buyer a claim. Indemnities cover specific known risks pound for pound. The negotiation over the scope of warranties, the limits on them, and what is disclosed against them is, in substance, the negotiation over who carries which risk. Intellectual property and data warranties are a core part of this, informed by the diligence covered in our IP due diligence note.
A deal can trigger clauses in the target's own contracts. Key customer and supplier agreements, leases, licences and financing may contain change-of-control provisions requiring consent. Employees, and in some deals works councils or regulators, may need to be informed or consulted. Mapping these consents early prevents them from derailing the timetable late.
Signing and closing are often not the same day. Between them sit conditions: regulatory approvals, third-party consents, and confirmation that nothing material has gone wrong. A clear conditions list and a realistic timetable keep the period between signing and completion under control, and a transitional services agreement often bridges the handover afterwards.
M&A sits in our commercial contracts and transactions work, alongside corporate funding. Preparation is everything, so see due diligence and the data room, what to expect in M&A due diligence, and valuing an IP portfolio. Transaction documents are drafted and reviewed through our Contract Studio technology.
It depends which side you are on and what the target looks like. Sellers usually prefer a share deal for a clean exit; buyers often prefer an asset deal to leave historic liabilities behind. Tax and the nature of the assets usually decide it.
An earn-out ties part of the price to the business hitting targets after completion. It bridges a valuation gap, but it creates friction because the seller no longer controls the business that has to hit the targets. Clear definitions and governance during the earn-out period are essential.
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