What Are Merger and Acquisition Contracts?

Mergers and acquisitions (M&A) is a collective term used to describe the consolidation of companies into larger ones using different types of financial transactions. Transactions involved in M&A contracts include mergers, acquisitions, asset purchases, tender offers, and consolidations.

The terms “merger” and “acquisition” have slightly different meanings. Merger means that two companies have joined hands and decided to proceed as one firm. It indicates that the CEOs of both companies have mutually agreed to ally. The structure of mergers depends on the relationship between two parties, but they include vertical, horizontal, conglomerate, and rollup mergers.

Acquisition refers to a company acquiring another company as the new owner. In this scenario, an organization may not desire to become a part of another one, but it might not have a choice when the takeover is hostile.

Merger and acquisition contracts generally contain several elements. They’re handy when it comes to communicating the terms and conditions of one company to another. Clarity is important in all clauses of these transactions, as M&A contracts are generally complex and lengthy.‌‌

Disputes tend to arise between parties during mergers and acquisitions. M&A contracts help manage these problems and protect the rights of both parties. They determine how the companies will share assets and information correctly. Moreover, M&A contracts perform process management functions to ensure a smooth consolidation or takeover.

These contracts are worth the hassle because a lot is at stake when consolidation occurs between companies. Buyers invest vast amounts of money into negotiations and asset purchases. Changes in ownership are extensive undertakings that require careful dealing. It involves more than just collecting money and assets — you’re essentially handing over your whole business to someone, or vice versa. Cautious, thorough handling is crucial. 

M&A contracts also specify the prices of assets and make price adjustments. They help specify the terms and conditions of contract deals. 

M&A contracts are useful for dealing with: 

• Both the parties involved
• The deal structure — the asset purchases, stock purchases, and mergers
• The deal currency — stocks, debts, cash, and assets.

During consolidation, assets involved include real estate, intellectual property, contractual agreements, and more. The situation is stressful for both parties because so much is at stake. The successful sale of companies requires a dynamic understanding of all these scenarios.‌‌

During a merger or acquisition, you’ll need to disclose the details of the terms before finalizing any arrangement. The contracts include all these details and allow you to negotiate appropriately.

Corporate statutes mandate that boards and shareholders approve mergers after the agreements have been submitted. M&A contracts will give a concise overview of these agreements between companies before the finalized takeover or consolidation. 

Furthermore, M&A contracts give companies the chance to expand their market without heavy expenses and losses. This way, competition decreases, and companies get more market shares.

M&A contracts are divided into sections or articles, each containing different information. Sequentially, these articles consist of:

1. ‌Parties and recitals
2. ‌Price, currencies, and structure
3. ‌Representations and warranties
4. ‌Covenants
5. ‌Conditions
6. ‌Termination provisions
7. ‌Indemnification
8. ‌Tax
9. ‌Defined terms and conditions
10. ‌Miscellaneous clauses

There’s a reason for the strategic sequence of these articles. The first items laid out in front of the opposing party are their areas of interest. Following this are the terms and conditions that both parties have to abide by. The covenants determine the conduct of the contract before its finalization. In case of undesirable outcomes, termination provisions provide all the required information. ‌

‌The other articles, like taxes and indemnification, come after the formal closing of the contract. As discussed earlier, the finalization of mergers and acquisitions takes time. This is why it’s necessary for an M&A contract to cover all the details extensively.

‌Many M&A contract templates are available online for this purpose. You can choose the ones that suit your situation with all the necessary terms and conditions.

The first step is to come up with an efficient acquisition strategy. Then you can set up your M&A research criteria to identify the companies you want to partner with. A valuation analysis helps acquire financial data about the company. Negotiations will follow this step if all else goes well. 

M&A due diligence aims to confirm whether the acquirer’s information about the company is valid. If no problems arise during due diligence, you can draw up a finalized purchase and sale contract. Lastly, financing details and integration of the acquisition are carried out.

The contract will also contain details of the two companies involved in the merger. The relevant contact information and names of the key people involved are included, along with the number of entities involved — dissolving, surviving, and final.

Finding suitable M&A contract templates online can be tricky. Since so many options are available, companies face difficulty choosing the one that suits them best. ‌

Such contracts also require much editing. Because mergers and acquisitions can take months and sometimes years, keeping track of these edits can seem impossible. Companies have to keep going back and forth for negotiations. This includes unnecessary emails and the use of outdated file servers to keep track of them. 

The whole process is time-consuming and requires extensive paperwork. This takes attention away from strategizing suitable terms and conditions because legal departments are often held up by other commitments.

Furthermore, companies are forced to hire expensive attorneys outside of their legal departments for the whole process, incurring additional expenses. With a general lack of automation in contract workflows, progress becomes slow. ‌

All the required documents for the contract are stored across multiple isolated systems. Tracking data is challenging, and it causes accessibility issues for the organization. Different teams within the company are unable to access the contracts. This decreases constructive participation and insight from other stakeholders. Without transparency in the contract lifecycle, managing it becomes a nuisance.

A company can opt for automated tools to lessen the time-consuming burden of managing M&A contracts.

Digital contract lifecycle management eases the burden of contract processing on organizations. With highly adaptive tools, this software supports all kinds of contracts. It allows deep integration with all the teams within a company, which is very useful during mergers and acquisitions. 

Drafting M&A contracts is tiresome, but it doesn’t have to be. The Workflow Designer tool at Ironclad helps to manage these contracts efficiently. 

Have you ever spent hours looking for a suitable template for your contracts? Mergers and acquisitions require particular templates due to the uniqueness of the companies involved. Each company has distinctive tangible and intangible assets and entities, and the required terms and conditions vary from one organization to another. 

The Workflow Designer helps by providing a self-serve platform to generate editable workflows of your interest within minutes. Designing and creating your M&A contracts becomes much more straightforward. The templates are all customizable, too.

Instead of spending precious time on contract approval, you can develop intelligent strategies to negotiate good deals with the partner company. 

The Workflow Designer also helps businesses ensure that their M&A contracts comply with legal requirements and policies. 

Suppose the company you want to consolidate with asks you to handle its M&A contracts remotely. The time zone differences can cause stress and make you wonder how you’ll manage all the work. The Ironclad Clickwrap feature enables you to execute M&A contracts online from anywhere in the world. With both parties on the same platform, the execution and approval process will be seamless.‌

It will also reduce the inconvenience of emailing documents for signatures. You can instead get your contracts signed and approved on a single platform. The user-friendly interface means you won’t require IT specialists to do the job for you. You can control the contract workflows independently within the comfort of your home or office.

‌M&A contracts require much editing, which can waste plenty of time if done manually. Plus, the changes are hard to track. The Ironclad Editor provides tools to revise your contracts online. 

‌Redlining is often done during the negotiation phases of M&A contracts. You can do this online and keep records of all your changes as well. Your colleagues are updated when contracts undergo edits, enabling everyone in your organization to stay on the same page. No more blaming legal teams for unnotified changes.

Merger and acquisition contracts enable smoother consolidation or takeover of companies. They can settle disputes and ensure a hassle-free process. Managing M&A contracts is a challenge that your business can now manage more easily using digital contract management platforms. With the right tools, these contracts can change your company’s dynamic and bring about immense growth.