What is a Merger Agreement Review?
A merger agreement is a legal contract that sets the guidelines for how companies can join forces and become one legal entity.
It has to provide clarity on all the procedures and rules required. Once it’s drafted, reviewing it is essential to ensure it’s legal and clear to prevent disputes between parties.
Here is how to review a merger agreement for clarity and when to consult a professional lawyer for help with the process.
What are Common Terms to Review in a Merger Agreement?
A merger agreement usually contains the following key terms:
- Transaction. Check that there’s clarity how the terms will legally combine, and what transactions are required, such as what shares will be converted.
- Covenants. Ensure that there are rules for how the companies must operate after signing the contract and finalizing the transaction.
- Closing conditions. Explore the requirements for finalizing the merger, which can include approvals.
- Representations and warranties. Both parties must make statements to each other to protect themselves from risks.
- Price. This is the agreed-on price for the purchased stocks. Verify that the type of payment is appropriate for the purpose of the merger.
- Employee provisions. Check the agreement for employee treatment, bonuses and other arrangements that apply to the transaction.
What are Tips for Reviewing a Merger Agreement?
A merger agreement requires careful review so that you don’t derail the deal. Here are some things to consider during the contract review process.
Allocate Responsibilities
The agreement should explain both parties’ duties and roles under the agreement, such as for the post-merger period. If you don’t have these clearly stipulated in the document, you risk poor management and disputes.
Conduct Due Diligence
While your merger agreement should have representations and warranties, you should still conduct your own research to verify that the other company isn’t misrepresenting themselves.
Confirm if There’s a Confidentiality Clause
Some merger agreements contain a confidentiality clause to prevent parties from exposing sensitive business information to third parties. Make sure that confidentiality provision duration is clearly stipulated, such as if it remains in effect until the contract is signed or a specific number of years afterward.
Check Indemnification
Your agreement should include an indemnification clause that navigates what happens in a breach or fraudulent information. Both parties should agree to certain financial amounts for violations. You want to confirm exactly which party can make an indemnification claim and who is responsible for payments.
Consider Termination
One of the most important clauses in a merger agreement is the termination provision that enables parties to walk away from the deal if it’s not suitable for them. Explain viable reasons for parties to terminate the agreement to protect their interests.
Think About Conditions Precedent
Check that the agreement contains information about how conditions precedent, or points that need to be addressed prior to the merger transaction is finalized, can be navigated. Some typical conditions in mergers include getting regulatory approvals and checking all financing requirements.
Do You Need a Legal Review of a Merger Agreement?
It’s strongly recommended to hire a lawyer to review your merger agreement before you sign it. This will protect you from financial exposure and risks.
A lawyer will:
- Check all the information in the agreement that’s easy to miss without a strong legal background.
- Explain exactly what both parties are agreeing to, such as consideration and closing conditions, so you don’t have any uncertainty.
- Review the indemnities and liability caps to minimise your financial risk.
- Clarify all termination rights to protect your interests.
- Consider additional clauses that could be appropriate for your merger agreement, such as non-compete clauses.
- Help you negotiate any unfavorable terms with the other party, should this be required.
- Explain what happens if the transaction isn’t successful.
- Confirm that all details in the agreement are accurate, such as the parties’ information and identification.
- Assess everything that must occur prior to the deal being completed, such as third-party approvals.
- Assist you with intellectual property concerns you might have, such as patents and software, so that it’s properly owned and transferred.
Where to Find a Lawyer to Review Your Merger Agreement
If you’re looking for a lawyer to review your merger agreement, you should take your search online. By using an online legal platform that connects you to lawyers in your location, you can make the lawyer search a stress-free process.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a curated network of vetted lawyers. All the lawyers on the platform have expertise and experience to assist you with your contract review requirements.
If you want to hire a lawyer to review your merger agreement, here are the easy steps to follow:
- Go to the ContractsCounsel marketplace, where it’s free to post your request or project.
- Include some details of what you require so that it’s easier to match with a suitable lawyer, such as if you’re concerned about any specific sections of your agreement.
- Wait for bids. You’ll receive multiple lawyer bids from lawyers on the platform without having to do anything.
- Review the lawyers’ information. ContractsCounsel provides a range of information about lawyers to help you choose the right one, such as their location, field of expertise, experience, and client ratings for previous projects completed on the platform.
- Select a lawyer to work with and hire them to review your merger agreement for a flat fee. If required, you can also hire a lawyer to draft your merger agreement from scratch.
