M&A

⚡tl;dr an m\&a deal follows a structure from nda to the closing of the agreements in switzerland, deals are usually structured as a share purchase agreement involve lexr at the nda or loi stage if you're a seller, make an internal due diligence before the one with the buyer to make sure you're ready for it book a free call with us what is m\&a? m\&a stands for mergers & acquisitions essentially, it is the act of transferring the ownership of a company to a third party how is it done? there are multiple ways to transfer a company to a third party from the m\&a definition itself, these transfers can be done via mergers or via acquisitions while formal mergers are possible and even regulated in switzerland by a specific law, in practice, m\&a deals are usually made via (i) share deals or (ii) asset deals making a share deal means buying all shares of a company to get underlying ownership (contracts, employees, physical objects, ip, etc ) in switzerland, we typically aim for share deals as this is easier to structure and makes sense from a tax perspective making an asset deal means buying all contracts, employees, ip, and physical objects from another company in switzerland, such deals are rather exceptional as they are difficult to implement and fiscally not optimal the decision between a share deal or an asset deal usually happens at loi stage (see below) as founders, it's important to reach out for legal advice at that stage to avoid having an inconvenient loi and being stuck with an inconveninent deal structure international deals asset deals are the main form of m\&a transactions in many cultures, especially in the usa this means that buyers could push for an asset deal from a swiss founders' perspective, it is important to teach and explain the share deal process in detail share deals can be scary for the buyers as the purchase includes all the company's history and risks what does an m\&a deal look like? all m\&a practice comes from common law countries such as the usa a process emerged and is applied quite consistently this process is the following preparation, market analysis, and teaser in this part, the goal is to define who you want to sell to and who could be potential buyers usually, the strategy advisor analyzes the market and drafts a 2 3 page document describing the company (i e , the teaser ) usually, only strategy advisors are active at this moment of the deal nda signing an nda ensures confidentiality a solid nda is essential to being able to share information prior to moving ahead in the deal for buyers, the nda allows them to get information on the company they want to buy for the seller's directors, it's key not to put in jeopardy the to be sold company by disclosing confidential information as a reminder, keep in mind that you can generate a free nda on our website info memo the info memo is a document usually prepared by strategic advisors which provides details on the market, the economic structure, and other financial elements related to the deal this is useful for the buyer but doesn't have a high legal relevance loi / term sheet the idea of a loi is for the parties to set forth the main elements of the future deals the loi is usually non binding but creates a framework for the parties to negotiate the future agreement the main reason for the loi to be non binding is that the due diligence hasn't happened yet, and the buyer might find elements that will change their attitude toward the deal the buyer notably determines (i) at what price they want to buy (either via a nominal price or a formula such as 8x ebidta), (ii) if they want to keep the employees, and (iii) if they intend to uphold the environmental commitments of the company the loi is often exclusive this gives certainty to the buyer that they can spend money and time into considering the transaction without fearing of losing it to a competitor the exclusivity must be a binding obligation and is usually agreed for 3 months , which can be tacitly renewed if the target is really attractive, it might make sense not to have exclusivity lexr tips while the loi is usually non binding, make sure to still list some key elements as binding to ensure the "usefulness" of the loi here's an example of an "absence of binding effect" clause (which paradoxically must be binding) " the parties expressly agree that, with the exception of the obligations as set forth under the paragraphs "confidentiality", "exclusivity," "legal fees and expenses", "absence of binding effect", “form requirements,” and "governing law and dispute resolution" which are intended to be and shall be legally binding, no binding obligations shall be created by this loi until definitive, legally binding agreements are duly executed and delivered by the parties " due diligence the due diligence is the process when the buyer (i e , its lawyers and advisors) reviews the documentation of the seller to assess whether a deal can be made at the value pre defined in the loi the due diligence is often split into technical due diligence (i e , assessment of the product, the software code, patented technology, etc ) financial due diligence (i e , assessment of the accounting results, business plan, p\&l, etc ) legal due diligence (i e , assessment of the corporate structure, the key contracts, the compliance with regulatory laws, etc ) as a seller , it is recommended to conduct an internal due diligence before the actual due diligence of the buyer to determine if something needs to be prepared or amended, and if the seller has all relevant documents ready the key legal elements to focus on as a buyer or a seller are chain of title , meaning whether the transfers of shares ( share transfer docid 7qcaqzr0euqqgzrrwo49q ) have always been correctly documented and made with wet ink signature change of control clauses , meaning whether the key contracts will survive a change of ownership of the seller in tech m\&a deals, this is highly relevant for licensing agreements as the buyer wants to make sure that all technically important elements will remain in place compliance with regulatory laws , meaning whether authorizations to do business were collected (if applicable) and whether the basics of data privacy are respected competition law , meaning whether the deal could be problematic from a competition law perspective (e g , monopoly) ip ownership , meaning whether the seller owns all of its ip and that no employees or third party could endanger the product by claiming partial ownership employees retention, meaning that employees have non compete in place incentivizing them to remain with with the company after the deal draft of the agreement traditionally, the agreement is formalized by the signature of a share purchase agreement (spa), where the buyer will buy shares from the seller to take control of the acquired company this is a share deal finally, if the deal is structured as an asset deal, it will be formalized by an asset purchase agreement signing and closing signing and closing are two different steps in the finalization of a deal signing = signature of the agreement by both parties closing = when the deal actually closes because all related closing actions (see below) have been done it usually takes place as a meeting with both parties' lawyers where shares will be exchanged against money this doesn't happen at the same time because some actions must be made between signing and closing this includes transfer of the authorization to do business (for example, finma authorization) negotiation and signature of a waiver of the change of control clauses in the key contract that the buyer wants verification that the representations and warranties agreed upon are still true at closing (e g , absence of litigation) fulfillment of corporate tasks, such as transferring of signature rights for the company sold, the resignation of the board members, etc payment of the purchasing price to the seller how do i get this done? book free calls with us regularly to discuss your exit strategy best practices timing make sure to involve us when you reach either the nda or the loi stage read more on the lexr blog https //www lexr com/en ch/blog/startup financing vc/ https //www lexr com/en ch/blog/startup financing vc/https //www lexr com/en ch/blog/m and a as means to grow and exit/ https //www lexr com/en ch/blog/m and a as means to grow and exit/https //www lexr com/en ch/blog/due diligence mergers and acquisitions tech companies/ https //www lexr com/en ch/blog/due diligence mergers and acquisitions tech companies/https //www lexr com/en ch/blog/mergers and acquisitions negotiation/ https //www lexr com/en ch/blog/mergers and acquisitions negotiation/https //www lexr com/en ch/blog/asset deal or share deal/ https //www lexr com/en ch/blog/asset deal or share deal/https //www lexr com/en ch/blog/exit startup how to prepare/ https //www lexr com/en ch/blog/exit startup how to prepare/https //www lexr com/en ch/blog/startup exit or scale/ https //www lexr com/en ch/blog/startup exit or scale/https //www lexr com/en ch/blog/distressed merger acquisition advisory/ https //www lexr com/en ch/blog/distressed merger acquisition advisory/