Most entrepreneurs and business owners understand that a primary goal for many, if not most, startups and tech companies is to eventually sell the company, even if the founders intend to remain with the company. It goes without saying that selling your company can result in an enormous payday and provide continued vitality for the company going forward. That said, it’s critical that owners/entrepreneurs comply with legal requirements and protect their legal interests throughout the sales process (also known as the “M&A process”) to maximize their chances for a positive outcome. With that in mind, there are a lot of legal considerations you’ll need to keep in mind when selling your business. First, let’s take a look at an overview of the process involved in a merger or acquisition (often referred to as an “M&A deal”). Our team of business attorneys at Woodall Batchelor PLLC is happy to share a high-level look at some of the most essential steps to successfully completing the M&A process.

M&A process

Engagement Letter of Financial Advisor

Often, the target of an M&A deal (meaning the company to be sold) will engage a financial adviser, such as investment bank, to guide the company through the M&A process. The financial adviser can carry out a number of roles in the deal, including providing valuation of the target company, finding acquirers for the target, negotiating the terms of the deal, and consulting with the target company’s Board of Directors. The first step in an M&A deal is therefore to decide whether the company will hire a financial adviser, who that financial adviser will be, and enter into an Engagement Letter between the target and its financial adviser which lays out the responsibilities the financial adviser will undertake and how it will be compensated.

Non-Disclosure Agreement

Because a proposed M&A deal often involves two companies who work in the same field, and who may indeed be competitors, delving into the non-public aspects of the target company’s business without the assurance of a completion of the deal, targets and acquirers will sign a Non-Disclosure Agreement (NDA) preventing either company from using sensitive information about the other to its advantage. An NDA should make clear what type of company information is covered by the NDA, how the companies should share and utilize that information through the course of the deal, and how that information might be shared with third parties such as accountants and outside law firms over the course of the deal.

Letter of Intent (Term Sheets)

Letters of Intent or Term Sheets are two similar types of documents which serve the same essential function: they set out the basic terms of the proposed deal in a non-binding manner. With both types of documents, the information that should be included boils down to what exactly is being acquired and what consideration (payment) will be provided. For example, are the target’s assets being acquired, or the whole company? With regard to consideration, the Term Sheet or Letter of Intent should specify whether cash will be provided (and from what source) or stock, and how that stock will be issued.

Term Sheets and Letters of Intent are meant to be non-binding, meaning one party cannot hold the other party accountable in court for their contents, and careful drafting of the documents is needed to make that non-binding aspect clear. However, there may be certain provisions, such as confidentiality and exclusivity, that are binding.

Due Diligence

During the due diligence phase of an M&A deal, the acquirer is given access to the target company to examine its business, its procedures, its records, and so on. This process often involves the use of outside attorneys and financial advisers retained by the acquirer to conduct the due diligence. The acquirer will be attempting to place a proper valuation on the target company and assess any risks, such as potential litigation risk and questions involving ownership of intellectual property, and determine whether it wants to proceed with the M&A deal and on what finalized terms.

Drafting & Negotiating Definitive Documents

Based on the due diligence findings, the next step in the M&A process is when the target and the acquirer (along with their financial advisers and attorneys) will then negotiate what will become the binding terms of the purchase agreement as well as any ancillary agreements such as employment agreements for individuals at the target company and financing agreements related to the purchase. The drafting and negotiating of these documents are often concurrent as both parties go back and forth on terms, and can continue up until closing.


Just like with a real estate purchase, the closing is where the target and acquirer meet to sign the finalized deal documents. At closing, the company ownership will change hands and the payment to the target’s owners will be finalized.

For more information about the M&A process, don’t hesitate to reach out to one of our business law attorneys at Woodall Batchelor PLLC.