Category Archives: Terminology

Mergers and Acquisitions

M&A Acronyms, Abbreviations and Definitions

Whether a transaction is defined as a merger or an acquisition is determined by a number of accounting tests.  Simply put, both parties in a merger need to meet a number of equality tests and, when met, transactions classified this way can be more tax efficient.  Because of the strict rules that apply here, most…

NDA-non-disclosure-agreement

NDA Agreement: Meaning and Sample Clauses

A Non Disclosure Agreement (NDA, also called CA for Confidentiality Agreement and MNDA for Mutual Non Disclosure Agreement) are contracts that stipulate that information received from a counter-party will only be used for the purpose as defined in the NDA.  Meaning, it will not be used as a basis for competitive tactics or shared freely…

business due diligence

What is Due Diligence and What Does it Entail?

Due diligence is an investigation of a business or person prior to signing a contract.  More specific to a business sale, business due diligence is the process of verifying the representations made in the CIM and other marketing materials provided to the potential acquirer by the seller.  For example, in a CIM it may say…

M&A Reps and Warranties

Reps and Warranties: Common Issues and Resolutions

All Purchase and Sale agreements (“PSAs”) have sections called buyer and seller reps and warranties.  The intent of these sections is to disclose and describe any known issues in the business and to address how they will be dealt with.  It is generally accepted that any issues that come up post-sale, but that existed or…

LOI

Why is the Letter of Intent (LOI) so Important?

The letter of intent is important because, in the context of a business sale, it marks the critical point where power shifts from the seller to the buyer. What I mean by this is that an LOI typically includes a term requiring exclusivity.  Exclusivity means the seller has to stop engaging with other possible buyers…

Purchase and Sale Agreement

The Purchase and Sale Agreement Explained

The Purchase and Sale Agreement (PSA or SPA in the case of a Share Purchase Agreement) is one document in a set of final documents that completes a company sale transaction.  Other documents typically include employment agreements, escrow agreements, non-competition agreements, releases, schedules and more depending on the type of transaction being contemplated. Importance of…