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M&A: Key Documents for Success

Mergers & acquisitions, or M&A, are complex transactions that require careful planning and execution. These deals involve either the consolidation of two or more companies to create a stronger, more competitive entity, or the takeover of one company by another. The process can be lengthy and intricate, involving multiple steps and negotiations, with legal and financial considerations. It is crucial for both the buyer and the seller to understand various stages involved in an M&A process and familiarise themselves with the documentation required at each step to ensure a successful transaction. In this article, we will explore the key documents involved in a typical M&A process, including NDAs, CIMs and SPAs. Understanding the purpose and contents of these documents will help parties to navigate the M&A process with greater confidence and clarity.

Source: Generational Equity

Investment Teaser

The investment teaser is the initial document that companies use to generate interest from potential buyers or investors. It provides a high-level overview of the company and its operations, highlighting the key selling points and potential for growth. The investment teaser typically includes financial metrics such as revenue, EBITDA, and growth projections, along with a brief summary of the company's products or services. Other details may include the proposed transaction structure, an indicative transaction timeline, key investment highlights and contact information. This is typically no longer than ten pages, and can be as short as a one-page summary. The teaser is mainly for pre-marketing purposes by the selling party, sounding initial interest from potential buyers investors in order to gauge who may be interested to proceed with the first phase of the M&A process. All marketing materials are typically prepared by the investment banking team that has been mandated as sell-side advisor.

Letter of Intent

The letter of intent (LOI) is a preliminary agreement that outlines the proposed terms and conditions of the transaction. The LOI is typically prepared after initial discussions between the buyer and seller and often includes essential details, such as the purchase price, payment terms, and any contingencies or conditions that must be met before the transaction can be completed. Although the LOI is not legally binding, it serves as a crucial milestone in the M&A process, setting the stage for more detailed negotiations between the parties. In addition to outlining the deal's basic terms, the LOI may also include provisions related to exclusivity, confidentiality, and the timeline for completing the transaction. Once both parties agree to the LOI, they can move forward with due diligence, which involves a detailed review of the target company's financial and legal records

Non-Disclosure Agreement

The non-disclosure agreement (NDA) protects confidential information exchanged between the buyer and seller during the due diligence stage. The NDA is designed to ensure that the buyer or investor will not disclose any sensitive or confidential information to third parties, thus safeguarding the seller's trade secrets, intellectual property, and other confidential information. The NDA is typically signed once a potential buyer is ready to move forward with their initial due diligence and requires detailed information about the business they are considering acquiring. The agreement may include provisions such as the scope of the confidentiality obligation, the duration of the obligation, and the remedies available in the event of a breach. An NDA is critical because it provides the seller with a level of assurance that the buyer will not misuse the information obtained during the due diligence process, while allowing the buyer to gain the necessary insights to evaluate the deal's viability. Without an NDA, the seller may be reluctant to share sensitive information, making it difficult for the buyer to conduct the necessary due diligence to make an informed investment decision.

Process Letter

Typically exchanged between the buyer and the seller, process letters outline the key terms and conditions of a potential M&A transaction. These letters serve