What are the primary documents involved in an acquisition?
Takeaway: While the Letter of Intent outlines the deal, the legally binding acquisition is governed by a massive, definitive Merger Agreement and a suite of ancillary documents that handle everything from stockholder consents to employee agreements.
The sale of your company is one of the most significant legal events in its lifecycle, and it is governed by a comprehensive set of legally binding documents. While the high-level business deal is agreed to in the Letter of Intent (LOI), the "definitive agreements" are what transform that blueprint into an enforceable reality. This stack of documents is prepared by the lawyers for both the buyer and the seller during the intense due diligence period.
The primary document in any acquisition is the Merger Agreement (or Stock Purchase Agreement / Asset Purchase Agreement), but it is supported by a range of other critical ancillary documents.
The Core Document: The Merger Agreement
This is the master document that legally governs the entire transaction. It is often over 100 pages long and contains all the detailed terms of the deal. Key sections include:
The Deal Mechanics: The precise structure of the transaction (e.g., a reverse triangular merger), the exact purchase price, and the formula for any purchase price adjustments.
Representations and Warranties: The long list of legally binding factual statements that you, the seller, are making about the company.
Covenants: Promises that you make about how you will operate the business between the signing of the agreement and the final closing.
Conditions to Closing: The final checklist of items that must be completed before the deal can close.
Indemnification: The detailed rules that govern how the buyer can make a claim against the sellers if a breach of the reps & warranties is discovered after closing.
Key Ancillary Documents
The Stockholder Written Consent: This is the formal document where your company's stockholders vote to approve the sale of the company. Obtaining the necessary stockholder approval is a legal prerequisite for closing the deal.
The Letter of Transmittal: This is a document that is sent to every single stockholder on your cap table. They must sign and return it to formally agree to the terms of the merger and to provide the wire transfer instructions for where their portion of the sale proceeds should be sent.
New Employment Agreements and Offer Letters: The acquirer is often buying your team as much as your technology. As a condition of the deal, all key employees will be required to sign new employment agreements or offer letters with the acquiring company.
Non-Competition and Non-Solicitation Agreements: Key founders and executives will often be required to sign agreements that prevent them from competing with the buyer or soliciting employees for a period of time after the acquisition.
The preparation and negotiation of these documents is a complex and time-consuming process that is managed by your M&A legal counsel. It is the final and most critical stage of papering a deal that will define the successful exit of the company you have built.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.