From NDA to Post-Closing: Behind the Scenes of an Acquisition
Anyone who has ever taken part in an M&A transaction knows that the path from the initial contact to contract closing can be long, complex, and full of challenges. Far beyond price negotiations, each stage plays a strategic role in ensuring a successful acquisition.
In this article, we provide a straightforward overview of the behind-the-scenes steps in an M&A deal — from the early stage, when parties are still assessing the business viability, to the challenges that follow post-closing.
1. NDA (Non-Disclosure Agreement): The First Step Toward a Safe Dialogue
The Non-Disclosure Agreement (NDA) is often treated as a formality, but its role is critical: it protects sensitive information of the target company and prevents the misuse of strategic data if negotiations do not proceed.
2. Term Sheet / LOI: Setting the Ground Rules for Negotiation
The Term Sheet or Letter of Intent (LOI) is the document in which the parties align the key terms of the transaction: deal structure, pricing, timeline, and potential conditions. At this stage, there is usually no binding commitment, but the document serves as a roadmap for future formal negotiations.
If there are non-negotiable terms, it is advisable to include them in the Term Sheet to avoid friction during the later stages of negotiation.
3. Due Diligence: The Business X-Ray
Due diligence is the phase in which buyers assess the financial, operational, legal, and accounting information of the target company. The goal is not just to verify the numbers presented, but to uncover hidden risks and negotiate changes in the definitive agreement based on those findings.
Common mistakes? Underestimating the importance of due diligence and relying solely on surface-level data.
4. Negotiation of the Definitive Agreement: Ensuring Protection and Balance
With due diligence complete, the parties proceed to the negotiation of the Definitive Agreement, often referred to as the Share Purchase Agreement (SPA). This document formalizes all final terms and conditions, including price adjustment mechanisms, liabilities, and representations and warranties.
Key provisions — such as indemnification clauses, earn-out structures, and dispute resolution mechanisms — must be thoroughly negotiated and well drafted to reduce the risk of future litigation.
5. Closing: Execution and Transfer of Ownership
The Closing marks the effective transfer of ownership of the target company or assets. It does not always take place immediately after the agreement is signed. Often, conditions precedent must be satisfied beforehand, such as regulatory approvals or corporate restructurings.
6. Post-Closing: The Challenge of Integration
Deal closed? Now begins one of the most challenging stages: integration. A flawless contract won’t mean much if the operational merger fails. Issues such as talent retention, cultural alignment, and operational synergies must be carefully managed to ensure the deal delivers the expected value.
The success of an M&A transaction does not rely solely on the negotiated price, but rather on how each stage is conducted. A poorly executed due diligence or a poorly planned integration can compromise the entire transaction.
