Professional Documents
Culture Documents
Binding Terms
Binding terms will not to further negotiation any more. That includes:
a. Legal ability of the seller to consummate the transaction
b. Protection of confidential information
c. Access to books and records
d. Breakup or walkaway fees
e. No shop (standstill) provision
f. Good-faith deposit—refundable versus nonrefundable
g. Impact on employees
h. Key terms for the definitive documents
i. Conditions to closing: Both parties will want to articulate a set of conditions or
circumstances such that they will not be bound to proceed with the transaction if
certain contingencies are not met or if certain events happen after the execution
of the letter of intent
j. Conduct the business prior to closing:
k. Expenses / brokers: The parties should identify, where applicable, who shall
bear responsibility for investment bankers’ fees, finders’ fees, legal expenses,
and other costs pertaining to the transaction.
a.
5. Common reasons why deals die at an early stage
a. The seller has not prepared adequate financial statements
(e.g.,going back at least two years and reflecting the company’s
current condition).
b. The seller and its team are uncooperative during the due
diligence process. Or The seller is inflexible on price and
valuation when the buyer and its team discover problems during
due diligence. Or the seller didn’t consider well the value after
due diligence facts such as tax adjustment
c. The seller suffers from “don’t call my baby ugly” and becomes
defensive when the buyer and its team find flaws (and then focus
on them in the negotiation) in the operations of the business, the
valuation, the loyalty of the customers, the quality of the accounts
receivable, the skills of the personnel, and so on.
d. The buyer and its team discover a “deal breaker” in the course of
the due diligence (e.g., large unknown or hidden actual or
contingent liabilities).
e. A strategic shift (or extenuating set of circumstances) affecting
the acquisition strategy or criteria of the buyer occurs (e.g., a
change in the buyer’s management team during the due diligence
process).