Finalizing the M&A Agreement
Completing each step in the Life Cycle may lead to slight re-negotiations on those points and the resulting amendment to the Share Acquisition and Share Transfer Agreements, especially after due diligence, and funding the deal.
The amendments to the agreements can be in the nature of adding conditions to certain clauses, restricting their term of operation or liability or be more serious such as stipulating the period by which the revenue must grow as per the stipulated amount or the buyer receives a discount, a greater cut of the existing revenue, or disinvests, etc.
BEWARE bad-faith negotiations. Do not make unreasonable demands at the eleventh hour. Even if they are reasonable, couch them in sensitive language. This is because, the more changes you request to the initially agreed M&A deal, the more likely it is that the deal will fall through because the other party views it as bad faith. More importantly, you will lose any advance payment or deposit made in the preliminary documentation, the Letter of Intent or MoU, as a show of good faith.
Closing the deal
The deal is said to close when all the parties have signed the Share Transfer/Purchase Agreements and Business Sale/Purchase Agreements i.e., the principal documentation, once all the obstacles and setbacks to the deal are overcome.
After the signing of the documents, the share certificates are exchanged, the payments are made, through an intermediary party, from accounts in escrow.
After which, all the arrangements made between the parties are enforced by law – through the stock exchanges, SEBI, RoC, the Ministry of Corporate Affairs and the NCLT. This is when the new entity comes into existence or the acquisition process is complete!
But don’t exhale a sigh of relief or pop open the champagne yet! You still have to make sure you’re getting the desired outcome from the deal……. which leads us to careful integration……….
