Mergers and Acquisitions – The Acquisition Agreement

Simply stated, the acquisition agreement sets forth the financial terms of the transaction and legal rights and obligations of the parties with respect to the transaction.  It provides the buyer with a detailed description of the business being purchased and provides for rights and remedies in the event this description proves to be materially inaccurate.  The agreement spells out closing procedures, pre-conditions to closing and post-closing obligations.  The agreement provides for representations and warranties and the rights and remedies if these representations and warranties are inaccurate.

The main components of the acquisition agreement and a brief description of each are as follows:

Representations and Warranties

Representations and warranties generally provide the buyer and seller with a snapshot of facts as of the closing date.  In respect to the seller, facts are generally related to the business itself, such as that the seller has title to the assets, there are no undisclosed liabilities, there is no pending litigation or adversarial situation likely to result in litigation, taxes are paid and there are no issues with employees.  From the buyer the facts are generally related to legal capacity, authority and ability to enter into a binding contract.  The Seller also represents and warrants its legal ability to enter into the agreement.


Covenants generally govern the parties’ actions for a period prior to and following closing.  An example of a covenant is that a seller must continue to operate the business in the ordinary course and maintain assets pending closing and if there are post closing payouts that the seller continues likewise.  All covenants require good faith in completion.


Conditions generally refer to pre-closing conditions such as shareholder and board of director approvals, that certain third party consents are obtained and proper documents are signed. Closing conditions usually include the payment of the compensation by the buyer.  Generally, if all conditions precedent are not met, the parties can cancel the transaction.


Indemnification and remedies provide the rights and remedies of the parties in the event of a breach of the agreement, including a material inaccuracy in the representations and warranties or in the event of an unforeseen third-party claim related to either the agreement or the business.


Schedules generally provide the true substance of what the seller is purchasing, such as a complete list of customers and contracts, all equity holders, individual creditors and terms of the obligations.  The schedules provide the details.

In the event that the parties have not previously entered into a letter of intent or confidentiality agreement providing for due diligence review, the acquisition agreement may contain this provision.  Likewise the agreement may contain no shop provisions, break up fees, non compete and confidentiality provisions if not previously agreed to separately.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

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