Part 1: What Are Mergers And Acquisitions
Part 2: Synergies In M&A Deals
Part 3: Outline Of Business Valuation Techniques
Part 4: Quick Overview Of M&A Process
Part 5: Selling Business To Private Equity
Part 6: Selling Business To Venture Capital
Part 7: Letter Of Intent (or “LOI”) In Mergers And Acquisitions
Part 8: Due Diligence Process
Part 9: Principles Of Negotiating In Mergers And Acquisitions
Part 10: Sale And Purchase Agreement
Part 11: M&A Deal Closing
After agreeing a letter of intent, your work is not done. In fact, it has really just started. Now, over the next 10 to 12 weeks, you have to steer your deal through the due diligence and documentation phases to closing. This is not as easy as it sounds. The first thing to remember is that you are still negotiating the letter of intent which is only the basis for the deal and the devil is in the detail. Be aware that there is still much that can be moved, including the price. Remember, in essence, the LOI is a non-binding document. The only thing that is binding are the confidentiality and exclusivity clauses.
And I cannot stress enough that you must remember in this phase of the deal that until you sign the contract, the counterparty that you are negotiating with is not the only deal in town. In fact, unless you absolutely have to do a deal, the do nothing option should always be an alternative. You will do a better deal if you do not feel that you have no other options. Always be prepared to consider one of your alternative counterparties once the LOI period of exclusivity has expired, or of course just walk away.
The economics of your deal comprise much more than just the headline price. You need to keep your mind open to the structuring potential of all the other variables. Form of consideration, deal structure, management incentives, detailed terms and conditions, representations and warranties, working capital, deal funding capital structure, speed of the deal, certainty and trust between the buyer and seller. You should aim to try to pin down the issues that are important to you sooner rather than later. But leave open any issues which stretch your side or which you find unacceptable. Work on the pace of your deal so that you maintain the momentum, but do not erode trust by going back on something that is already agreed.
I would make a caveat, by saying that you need to be particularly aware of the negotiating style of your counterparty. Anglo-Saxon negotiators tend to be linear and trade off issues in return for compromises on other issues. Other styles of negotiation are less trading-based and more like a game of chess. Be aware of the other side reopening an issue which you thought was closed and against which you have already made a concession, and don’t let them seek further compromises and concessions from you.
Understanding the style of your opponent is an important part of the negotiation to come. Some may take a strong position on some key issues, but having set out their argument can be persuaded to compromise a move towards you. Others keep the specifics less defined and argue from the point of principle. This leaves much more details to be nailed down and can be a bit like catching eels: just as you think you have caught another one, the first one slips from your grasp as the other side reopens the issue. Watch the game from a detached position and maintain your perspective on the strategy and approach being taken by the other side while still ensuring that your agenda moves forward.
Do not just listen to what the other side says. Keep a close eye on how they behave and their body language. Any negotiation is a process of building trust. It is less important what is said than what the other side does when it comes to following through on their commitments. On your side, keep a close eye on the context of everything you do, from staging meetings to the way that you draft documents. You may not always want to create an easygoing and friendly atmosphere.
There may be times when you want to communicate strength or impatience without actually putting these sentiments into words. Think about how and when you organize meetings, the agenda that you set, and who and how many people attend from your side. Above all, make sure that your team is briefed before any meeting to understand your game plan, your objectives for the meeting and who going to be leading the discussions from your side.
Remember in the coming weeks everything is negotiable. Even after you have signed the deal, while you are in a process towards completion, and you have a letter of intent to guide you, everything is essentially on the table, and you need to be flexible enough to respond to this.
Remember that while the lawyers argue over the detail in the sale and purchase agreement, they are being directed by the principles on either side, both of whom will be continually seeking advantages over the other.
Finally, remember that every deal is a unique experience with a unique set of players. Be sensitive to the personalities and egos on both sides and manage the process. Do not try to run a fixed game plan, or you will never reach the winning line.
The first thing you must do before you go into the deal closing is to organize and convene a negotiation strategy meeting with your team. It is important that you hold similar meetings also before any other major meeting with the other party in the pre-close phase, be it the meeting to draft or review the first version of SPA, before you go to meet to discuss due diligence process, etcetera.
You must have a game plan and a strategy for your deal. When conducting your internal strategy meetings make sure that you invite your entire team to these meetings and include your key advisors, lawyers and accountants who will have a lot to add to this and any other specialists you are bringing in, whether they are environmentalists or the tech people or anybody else. Get the leading players in there to make sure that you get all the issues and all the ideas out on the table.
You need to brainstorm your major deal points and I would rank them A and B. The really critical ones are A and all the minor detail is B. So you get a clear differentiation in your minds about what is important to you and your client in the forthcoming negotiation.
You can conduct your strategy meetings around the following deal variables:
So address these deal variable structure points along with the due diligence questionnaires that your advisor would have received from the buyer and how you have answered these questionnaires.
Look at all the meeting notes that you’ve got from the meetings that have already taken place with the other side, including up to the LOI signing meeting, to see what points have come up so far in the deal for discussion? What points have you decided are important? Which points have you discussed? What was left out from LOI and parked until later in the deal. You need to be aware of all of these.
Then at the end of this meeting decide what your game plan is, or the approach you are going to take, the style you are going to take, who is going to lead the negotiations in which meetings and what your strategy is going to be for your first meeting.
Will you take a hard approach or a soft one? And do not forget to make sure that you keep listening to what the other side says and how they say it. So continue to learn from what they are actually telling you, not only about their position, but about the way they are thinking about themselves.
It was once said that a deal is three things: how much money you get, when you get it, and why you might have to give it back.
You have to accept that in this stage of the deal it will be competitive and adversarial. Your biggest challenge on either side is to continually build and develop a relationship based on trust as the deal progresses. There is no substitute for eating and drinking in moderation together at various points during the deal. And particularly if you are trying to overcome something difficult, make these occasions purely social and make it a rule not to talk about business at all during the lunch or dinner the next day. Your discussions will be much more constructive and objective on both sides.
There can be difficulties agreeing the amounts and terms of earn-out payments or the impact of future contingent events that take place after closing. It is important at the stage to make sure your process is well run. Make sure that any expert opinions or reports are delivered in a timely manner and are correctly considered before their findings are incorporated into the drafting of SPA. You must be organized or mistakes will be made.
Consider particularly the updating of any financial information. The LOI will have been agreed on the basis of a set of financial projections. A short due diligence and documentation period lessens the risk that these will change, but they can. In the event of a material unseen event impacting the fortunes of the company, this could just as easily be a positive event as a negative one.
A source of unexpected trouble can come from commercially sensitive agreements, which the seller will be cautious about disclosing too early in the process. Often these can be challenging because the two parties to the deal are competitors and the information in the agreements can be commercially confidential and potentially damaging if disclosed and the deal does not close.
Watch out two for change of control clauses in contracts with customers and suppliers. Losing a significant party of either type after a deal can have a materially negative impact on a business immediately after the deal has closed.
And when everyone is trying to focus on post-deal implementation, which may include significant management changes too, it is important to ensure a detailed review of all licensing agreements and intellectual property to make sure that there are no hidden issues.
Try to manage the process so that the documentation of the deal does not get too far advanced before at least the preliminary results of the due diligence start to come in. The seller should always be trying to ensure that any material information is disclosed early, even if some very confidential information is held back for a number of weeks. If material information comes to light at a later stage, it is increasingly likely that the buyer will seek some form of renegotiation. The longer the deal goes on, the weaker the negotiating position of the seller becomes.
Once you start the post LOI process, you definitely want a clear timetable to deal signing and deal closing. To achieve this, it is important to make sure that the principals in the deal remain actively involved so that decisions can be taken in an informed and timely manner.
Any process which is continuously put on hold while the negotiators check back to head office is likely to run into trouble rapidly. This means that those involved have to take responsibility for the content of the SPA on both sides. It is important that you have strong, engaged teams of advisors on both sides. Their transaction experience can really speed things along if they are familiar with issues which they have seen before and know how to negotiate and document.
It also helps if your advisors are familiar with terms and negotiating styles, which they may have encountered when managing deals with the counterparty in a previous transaction.
A key step to getting a deal over the finishing line is to agree early on that any deal point that has been agreed cannot be reopened. You may find this difficult to achieve when negotiating with Southern European or Asian counterparties. It is a question of culture and style. Not doing this runs the serious risk that the discussions and negotiations simply go round in circles, meeting themselves, coming back again. At the end of the day, you have to be prepared to walk away. It may be that there are some material issues that you just cannot agree, and no amount of persuasion or cajoling will get the other side to move. While we all like to be tenacious, and we hate to see a deal die, ultimately a bad deal in all probability will not close or there will be material difficulties between the parties after closing the deal.
A simultaneous signing and closing is what we all aim for. On occasions, if shareholder agreement or regulatory permissions are required, this is not possible. A closing deferred in time always runs additional risk of the business performance during the period between signing and closing. This can also lead to extended negotiations about who bears the risk during this period. A simultaneous closing reduces risk, complexity and cost and provides certainty for both sides once a deal is signed.
There is also a risk that the selling management disengage, and this can have an adverse impact on business performance. If the deal does not close, the business is damaged and the management are back at the helm with more problems than they started with closing complexities.
Closing a deal is more than getting a signature on a legally binding document. There are normally a complex series of events which need to take place as contemporaneously as possible, not the least the wire transfer of the consideration.
The lawyers need to think through the logistics of the closing meeting. This normally involves getting all the parties to their offices often until 3:00 AM where a large table groans under piles of files, agreements and documents for approval apart from the sale and purchase agreement, which we have been discussing.
These can include board and shareholder consents, corporate resolutions and authorizations, legal opinions, additional supporting documents including employment and escrow agreements, the consideration, cash or shares, financing agreements, regulatory approvals, evidence of third party consents such as change of control, consents (where applicable).
In addition to all this, the representations and the warranties need to be in place. Non-compete and non-solicitation agreements need to be ready and should be in place before signing and endure after it.
Don’t underestimate the complexity of the logistics. If you have experienced lawyers, this is unlikely to be an issue. But where the legal firm advising is not an M&A specialist, this can create real difficulties.
It is preferred to get everyone around the table to close a deal, but virtual closings are increasingly common. We all lead busy lives, and getting major corporations to free up the time for senior management to cross continents to attend may often be difficult. And thus face-to-face closing can be very difficult to arrange.
At the very least, all principles to the negotiation must be available for the entire 24 hours before the deal closes so that any last minute issues can be addressed promptly.
Let’s take a look at the key learning points from deal closing. The best advice I can give you is be prepared for the unexpected. This stage of the deal will always be competitive and adversarial, and you will get stuff thrown at you from left and right. So be prepared and do not get caught out. Be ready for something that you may not think will be coming your way, and then you will be better able to deal with it. And if in doubt just say: “yes, of course, that is very interesting, let me get back to you”.
Make sure you run the whole process very well. This is so important to get on top of the whole management of the due diligence and documentation process because unless you do that, unless it is run very tightly, you will make mistakes and mistakes will be costly.
You can expect that any commercially sensitive agreements with third parties will cause disclosure difficulties, and the other side will want to disclose them as late as possible in the process.
You should also in these agreements look out for any change of control clauses because this can really trip something up. If the company you are buying has got a major customer or a major supplier and there is a change of control clause in their agreement, then their permission for the deal will have to be acquired, or they may well have an excuse to break the agreement or you will have to renegotiate the terms of that agreement. So look out for that. It can be a real problem if it is not dealt with efficiently.
It is important that the principles, the people who make the key decisions in this deal, remain involved, so they stay on top of all the detail which will enable them to make decisions when they are called upon to do so in a timely and fully informed manner.
And you need to keep these core team completely plugged in, otherwise you will spend an awful lot of time briefing them and bringing them back up to speed in order to get the decision you need to keep the deal moving forward.
One of the really essential points to getting any deal over the line is to agree mutually that once a point has been agreed, it is agreed. Do not fall into the trap of “everything’s always negotiable even after you have signed”, do not agree that nothing will be agreed until everything is agreed because that just invites the other side to reopen points that have been closed. Be aware of this and try to get this principle established very early on.
Ideally you want to get a simultaneous signing and closing, so you get everybody in the room, you have all the documentation there leading with the share purchase agreement, but everything else is done at one time. This reduces risk and complexity and the cost, of course, and it certainly ensures that both sides’ risk of the deal not closing is mitigated.
I know it is not always possible, but closing a deal is more than just getting a legally binding signature on one document. It normally involves not only a complex series of events, but there are always many interrelated documents, shareholder approvals, board approvals, board minutes, all these sorts of things that have to be signed and agreed in order to get the deal closed. So be prepared for that. It is a complex process.
I prefer to get everybody around the table in one room and then if anything comes up in the last minute you can deal with it. But I accept that virtual closings are more and more current and understand that even if you have agreed a deal at the LOI stage, getting through due diligence and documentation requires a huge effort and commitment from everybody to make sure the deal gets closed.
Subscribe now for thought-provoking content delivered straight to your inbox
The FutureEdge CFO Academy (“aka” Blog) is our central repository for all meaningful information and content that FutureEdge CFO cares for and supports, which we package and make accessible to anyone who visits our site to facilitate creative thinking and inner reflection. We aspire to cultivate a growing body of knowledge that is uniquely our own, but is acquired externally, and we share it to promote the values we stand for, but also to help make sound decisions and take the most effective action.
Effective change management is the cornerstone of successful M&A integration, providing a structured approach to align systems, processes, and people while addressing challenges like cultural alignment and employee resistance to ensure seamless transitions and lasting value creation.
Read More
Porter’s 5 Forces Model helps businesses analyze their competitive landscape by evaluating rivalry, new entrants, supplier and buyer power, and substitutes. Use this framework to craft winning strategies.
Read More
The 5 Pillar SaaS Model provides a comprehensive framework for SaaS success by focusing on Growth, Retention, Gross Margins, Profitability, and Efficiency. This holistic approach helps businesses optimize key metrics, adapt to their lifecycle stage, and build a scalable, sustainable company.
Read More
Is your business stuck in competitive Red Oceans, or are you exploring opportunity-rich Blue Oceans? Transitioning requires smart market analysis: uncover gaps, address unmet needs, and innovate. Learn how companies like Tesla and Netflix redefined industries and created fresh demand. Chart your path to growth by embracing innovation and creating your Blue Ocean.
Read More
High-performing teams aren’t built by HR—they’re shaped by leaders who inspire purpose, foster trust, and create clarity. While HR provides tools and frameworks, the real work happens in daily interactions, decisions, and leadership accountability. Discover the five pillars of exceptional teams and how leaders can drive extraordinary results.
Read More
In today’s competitive business environment, strategic clarity is essential. A well-defined mission, vision, and values framework serves as a guiding star for decision-making and ensures alignment across operations. Central to achieving this clarity is understanding your business’s value chain—a powerful tool that dissects your operations into distinct activities to identify where value is created, costs are incurred, and competitive advantages can be leveraged. This article explores the value chain concept and provides a practical three-step framework to analyse and align it with your mission, vision, and values, helping businesses optimize operations, reduce costs, and enhance their competitive edge.
Read More
EN 
DE 
FR