Question 1

What is the difference between an asset purchase and a stock purchase?

Accepted Answer

In an asset purchase, the buyer acquires specific assets and liabilities of the target company — the buyer can pick and choose what it acquires and generally does not assume unknown liabilities. In a stock purchase, the buyer acquires the ownership interests in the target company and takes on all of its liabilities, known and unknown. Asset purchases are generally preferred by buyers for liability protection; stock purchases are often preferred by sellers for tax reasons.

Question 2

What is due diligence in an M&A transaction?

Accepted Answer

Due diligence is the process by which a buyer investigates the target company before closing the acquisition. Legal due diligence covers contracts, employment matters, litigation history, intellectual property, regulatory compliance, and corporate governance. The goal is to identify risks and liabilities that may affect the purchase price, deal structure, or the buyer's decision to proceed. Thorough due diligence is essential to protecting the buyer's investment.

Question 3

What are representations and warranties in a purchase agreement?

Accepted Answer

Representations and warranties are statements of fact made by the seller about the target company — its financial condition, contracts, employees, litigation history, and compliance with law. If a representation or warranty is false, the buyer may have an indemnification claim against the seller. Negotiating the scope, accuracy, and survival period of representations and warranties is one of the most important aspects of M&A deal negotiation.

Question 4

What is an earnout provision?

Accepted Answer

An earnout is a provision in a purchase agreement that requires the buyer to pay additional consideration to the seller if the acquired business achieves specified financial targets after closing. Earnouts are commonly used when the buyer and seller disagree on the value of the business. They can be a useful bridge to closing, but they frequently give rise to post-closing disputes about whether the targets were met and how performance was measured.

Question 5

What is indemnification in an M&A transaction?

Accepted Answer

Indemnification provisions require one party to compensate the other for losses arising from breaches of representations and warranties, undisclosed liabilities, or other specified events. Indemnification is the primary mechanism for allocating risk between buyers and sellers in M&A transactions. Key negotiating points include the survival period for claims, deductibles and caps on liability, and the scope of covered losses.

Question 6

How long does an M&A transaction take to close?

Accepted Answer

The timeline depends on the size and complexity of the transaction, the extent of due diligence required, and whether regulatory approvals are needed. Small to mid-size business acquisitions typically close in 60 to 120 days from letter of intent. Larger or more complex transactions may take longer. We work efficiently to move transactions to closing while ensuring our clients' interests are fully protected.

Question 7

What happens if a dispute arises after the acquisition closes?

Accepted Answer

Post-closing disputes most commonly arise over purchase price adjustments, earnout payments, and indemnification claims for breaches of representations and warranties. Many M&A purchase agreements include mandatory arbitration provisions for post-closing disputes. We represent buyers and sellers in post-closing disputes, including arbitration proceedings and litigation in state and federal court.

Question 8

Do I need an M&A attorney for a small business acquisition?

Accepted Answer

Yes. Even small business acquisitions involve significant legal complexity — employment matters, contract assignments, regulatory compliance, and liability allocation. The purchase agreement terms you agree to today will govern any disputes that arise after closing. Having experienced M&A counsel on your side protects your investment and ensures the deal is structured to achieve your goals.

Mergers & Acquisitions Lawyer Utah

Utah Mergers & Acquisitions Attorneys

M&A Services

Asset vs. Stock Acquisitions

Due Diligence

Purchase Agreement Negotiation

Letters of Intent

Post-Closing Disputes

Management Buyouts

Frequently Asked Questions

Structure your deal to protect your investment.

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