Mergers & Acquisitions 

Strategic Counsel for Investment Firms, Advisors, and Financial Market Participants

Mergers and acquisitions represent some of the most significant transactions a company, investor, founder, or business owner will undertake. Whether a company is acquiring a competitor, selling a business, merging operations, bringing in strategic investors, or transitioning ownership, the transaction requires careful planning, negotiation, due diligence, and execution. A successful transaction requires more than agreeing on a purchase price. The parties must address ownership, intellectual property, contracts, employees, liabilities, regulatory issues, financing, tax considerations, operational continuity, and post-closing obligations.

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The Westmoreland Law Firm represents businesses, founders, investors, executives, and entrepreneurs in mergers and acquisitions involving:

• Business acquisitions

• Business sales

• Asset purchases

• Stock purchases

• Membership-interest transactions

• Mergers

• Strategic investments

• Joint ventures

• Private-equity transactions

• Founder exits

• Succession transactions

• Corporate restructuring

• Due diligence

• Transaction negotiations

• Purchase agreements

• Post-closing disputes

Our approach focuses on protecting value, identifying risk, and structuring transactions that align with the client’s business objectives.​

WHAT IS A MERGER OR ACQUISITION?

A merger or acquisition involves the combination, transfer, or restructuring of business interests. These transactions may involve:

• One company purchasing another company

• Two companies combining operations

• An investor acquiring an ownership interest

• A founder selling ownership interests

• A company purchasing selected assets

• A strategic partner acquiring a business unit

• A family-owned business transitioning ownership

• A company restructuring before financing or sale

The appropriate structure depends on:

• Business objectives

• Tax considerations

• Liability concerns

• Regulatory requirements

• Existing contracts

• Employee obligations

• Intellectual-property ownership

• Financing arrangements

• Future operational plans

No two transactions are identical. The legal structure should reflect the parties’ objectives and risk tolerance.

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TYPES OF M&A TRANSACTIONS

Asset Purchases

In an asset purchase, the buyer acquires selected assets of a business rather than purchasing the ownership interests of the company itself. Assets may include:

• Equipment

• Inventory

• Customer relationships

• Contracts

• Intellectual property

• Real property

• Technology

• Websites and domain names

• Trade names

• Licenses

• Business records

• Goodwill

Potential advantages may include:

• Ability to select desired assets

• Reduced exposure to certain historical liabilities

• Flexibility in structuring the transaction

Potential challenges may include:

• Transferring contracts

• Assigning licenses

• Obtaining third-party approvals

• Allocating liabilities

• Transferring employees

• Addressing tax consequences

The purchase agreement must clearly identify what is included and excluded from the transaction.

Stock Purchases

In a stock purchase, the buyer acquires ownership interests directly from the shareholders. The company generally continues as the same legal entity. Potential advantages may include:

• Continuity of contracts

• Continuity of operations

• Simplified transfer of ownership

Potential challenges may include:

• Assuming historical liabilities

• Existing litigation exposure

• Unknown regulatory issues

• Employee obligations

• Tax consequences

• Hidden liabilities

Comprehensive due diligence is essential because the buyer may acquire both the company’s assets and its obligations.

Membership-Interest Purchases

For limited liability companies, ownership interests may be transferred through a membership-interest purchase.

Issues may include:

• Operating agreements

• Member approval rights

• Transfer restrictions

• Buy-sell provisions

• Capital accounts

• Distribution rights

• Management authority

LLC transactions require careful review of governing documents and member rights.

Mergers

A merger combines two or more entities into a single surviving entity or creates a new entity. Merger transactions may involve:

• Corporate approvals

• Shareholder approvals

• Member approvals

• Board approvals

• Regulatory filings

• Assumption of liabilities

• Conversion of ownership interests

• Integration planning

Mergers require careful coordination because the legal structure of the entities changes as part of the transaction.

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DUE DILIGENCE

Due diligence is one of the most important stages of an acquisition. The buyer investigates the target company’s:

• Corporate structure

• Ownership records

• Financial condition

• Contracts

• Employees

• Litigation history

• Intellectual property

• Regulatory compliance

• Taxes

• Real estate

• Insurance

• Data practices

• Customer relationships

• Vendor relationships

• Debt obligations

Due diligence may identify:

• Hidden liabilities

• Ownership problems

• Contract restrictions

• Intellectual-property gaps

• Employment claims

• Regulatory exposure

• Pending litigation

• Compliance failures

• Financial inaccuracies

A buyer should understand the business it is acquiring before committing capital.

CORPORATE AND OWNERSHIP DUE DILIGENCE

Corporate records should confirm:

• Proper formation

• Ownership interests

• Capitalization

• Equity issuances

• Voting rights

• Board authority

• Member approvals

• Shareholder agreements

• Prior transactions

• Outstanding options or warrants

• Convertible instruments

• Investor rights

Potential issues include:

• Missing stock certificates

• Incorrect capitalization tables

• Unauthorized equity issuances

• Founder disputes

• Unresolved ownership claims

• Restrictions on transfer

• Investor consent requirements

Ownership problems discovered after closing can create significant disputes.

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FINANCIAL DUE DILIGENCE

Financial review may include:

• Financial statements

• Tax returns

• Accounts receivable

• Accounts payable

• Debt obligations

• Loans

• Revenue records

• Customer concentration

• Forecasts

• Expenses

• Cash flow

• Inventory

• Capital expenditures

Potential concerns include:

• Overstated revenue

• Unrecorded liabilities

• Customer dependence

• Accounting irregularities

• Uncollectible receivables

• Tax exposure

• Unreported obligations

Financial representations and warranties in the purchase agreement should address identified risks.

INTELLECTUAL PROPERTY DUE DILIGENCE

For many businesses, intellectual property is among the most valuable assets.

Due diligence may examine:

• Trademarks

• Copyrights

• Patents

• Trade secrets

• Software

• Source code

• Databases

• Designs

• Domain names

• Customer data

• Licensing agreements

Important questions include:

• Does the company actually own its intellectual property?

• Were employee and contractor assignments completed?

• Are patents properly maintained?

• Are trademarks registered?

• Are licenses transferable?

• Does the company use third-party software?

• Are open-source obligations satisfied?

• Has confidential information been protected?

A company may appear valuable while lacking ownership of the technology or intellectual property driving that value.

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CONTRACT REVIEW

Contracts may represent some of the most important assets and liabilities of a business. Due diligence may include:

• Customer agreements

• Vendor agreements

• Supply agreements

• Distribution agreements

• Licensing agreements

• Lease agreements

• Employment agreements

• Loan agreements

• Partnership agreements

• Government contracts

• Franchise agreements

Important issues include:

• Assignment restrictions

• Change-of-control provisions

• Termination rights

• Exclusivity obligations

• Pricing obligations

• Minimum purchase requirements

• Indemnity obligations

• Confidentiality provisions

• Intellectual-property ownership

• Renewal terms

A transaction may trigger consent requirements or termination rights under existing agreements.

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EMPLOYMENT AND LABOR DUE DILIGENCE

Employees are often among a company’s most valuable assets. Employment review may include:

• Employment agreements

• Contractor agreements

• Compensation plans

• Equity arrangements

• Benefit plans

• Employee classifications

• Wage-and-hour compliance

• Discrimination claims

• Harassment complaints

• Leave obligations

• Terminations

• Restrictive covenants

• Confidentiality obligations

Potential issues include:

• Misclassified employees

• Unpaid wages

• Pending employee claims

• Missing intellectual-property assignments

• Unlawful compensation practices

• Unresolved workplace complaints

• Change-of-control obligations

Employment liabilities can survive a transaction if not properly addressed.

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PURCHASE AGREEMENTS

The purchase agreement defines the rights and obligations of the parties. Important provisions may include:

• Purchase price

• Payment structure

• Closing conditions

• Representations and warranties

• Indemnification

• Escrow arrangements

• Earn-outs

• Restrictive covenants

• Confidentiality

• Allocation of liabilities

• Post-closing obligations

• Transition services

• Dispute resolution

• Governing law

A well-drafted agreement should address foreseeable disputes before they arise.

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REPRESENTATIONS AND WARRANTIES

Representations and warranties allocate risk between buyer and seller. A seller may provide assurances concerning:

• Ownership

• Financial statements

• Contracts

• Taxes

• Litigation

• Compliance

• Employees

• Intellectual property

• Environmental matters

• Assets

• Liabilities

The buyer relies on these statements when deciding whether to complete the transaction. If representations are inaccurate, the buyer may have contractual remedies depending on:

• The agreement language

• Materiality thresholds

• Notice requirements

• Survival periods

• Indemnification provisions

• Damages limitations

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INDEMNIFICATION

Indemnification provisions allocate responsibility for losses arising after closing. Potential indemnified matters include:

• Breach of representations

• Breach of warranties

• Contract liabilities

• Tax obligations

• Litigation claims

• Intellectual-property claims

• Employee claims

• Regulatory violations

• Pre-closing liabilities

Important indemnification issues include:

• Scope of covered losses

• Caps

• Deductibles

• Baskets

• Escrow funds

• Survival periods

• Notice requirements

• Defense control

• Settlement rights

Negotiating indemnification is often one of the most important parts of an M&A transaction.

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EARN-OUTS AND CONTINGENT PAYMENTS

An earn-out allows part of the purchase price to depend on future business performance. Earn-outs may be based on:

• Revenue

• Profitability

• Customer retention

• Product milestones

• Regulatory approval

• Performance targets

Potential disputes include:

• Manipulation of financial results

• Accounting disagreements

• Failure to operate the business consistently

• Disputes over metrics

• Integration decisions affecting performance

Earn-outs should clearly define:

• Calculation methods

• Accounting standards

• Management obligations

• Reporting requirements

• Dispute procedures

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PRIVATE EQUITY AND INVESTOR TRANSACTIONS

Private-equity and investment transactions may involve:

• Acquisition financing

• Preferred equity

• Debt financing

• Management participation

• Board rights

• Investor protections

• Exit requirements

• Governance rights

Important considerations include:

• Control rights

• Voting provisions

• Dilution

• Preferred returns

• Liquidation preferences

• Information rights

• Consent rights

• Exit strategies

Investors and founders should understand both economic and control implications.

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START-UP AND FOUNDER ACQUISITIONS

Acquisitions involving start-ups often require additional analysis of:

• Founder ownership

• Equity vesting

• Investor rights

• Intellectual property

• Employee equity

• Technology ownership

• Customer contracts

• Data rights

• Regulatory compliance

Potential issues include:

• Founders claiming ownership of technology

• Missing contractor assignments

• Unclear capitalization

• Outstanding investor rights

• Unresolved employment obligations

Early-stage companies should prepare for acquisition readiness well before receiving an offer.

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SUCCESSION AND FAMILY BUSINESS TRANSFERS

Business owners often use acquisitions or restructuring transactions to:

• Transition ownership

• Retire founders

• Transfer control to family members

• Sell to employees

• Bring in investors

• Preserve business continuity

Important issues may include:

• Valuation

• Buy-sell agreements

• Tax planning

• Family ownership disputes

• Management transition

• Estate planning

• Employee retention

• Financing

A successful transition requires both legal structure and operational planning.

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M&A DISPUTES AND POST-CLOSING LITIGATION

Disputes may arise after closing involving:

• Breach of representations and warranties

• Fraud allegations

• Indemnification claims

• Earn-out disputes

• Purchase-price adjustments

• Hidden liabilities

• Intellectual-property ownership

• Employee claims

• Contract breaches

• Failure to disclose material information

• Mismanagement after acquisition

Potential remedies may include:

• Contract damages

• Rescission

• Specific performance

• Declaratory relief

• Injunctive relief

• Arbitration

• Litigation

Early evaluation of the purchase agreement and transaction documents is critical.​

FRAUD AND MISREPRESENTATION IN ACQUISITIONS

A buyer may pursue claims when a seller intentionally or negligently provides materially false information concerning:

• Revenue

• Customers

• Assets

• Liabilities

• Intellectual property

• Compliance

• Litigation

• Regulatory status

• Business operations

Fraud claims require careful analysis of:

• The representation made

• Whether it was false

• Whether it was material

• Knowledge of falsity

• Reliance

• Damages

• Contract limitations

Due diligence may affect available remedies depending on the transaction documents.

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REGULATORY AND INDUSTRY-SPECIFIC CONSIDERATIONS

Certain industries require specialized M&A analysis, including:

• Healthcare

• Financial services

• Technology

• Government contractors

• Education

• Energy

• Manufacturing

• Real estate

• Professional services

• Cannabis businesses

• Consumer products

Regulatory considerations may include:

• Licensing

• Government approvals

• Privacy obligations

• Data security

• Industry restrictions

• Change-of-control requirements

• Antitrust concerns

• Compliance obligations

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ANTITRUST AND COMPETITION ISSUES

Larger transactions may require review under federal and state competition laws. Potential concerns include:

• Market concentration

• Reduced competition

• Exclusive arrangements

• Pricing effects

• Market power

• Competitor coordination

Certain transactions may require government notification or review depending on transaction size and applicable law.

CONFIDENTIALITY AND DEAL PROTECTION

M&A transactions require protection of sensitive information. Common agreements include:

• Confidentiality agreements

• Nondisclosure agreements

• Letters of intent

• Exclusivity agreements

• Non-solicitation provisions

• Data-room restrictions

Confidential information may include:

• Financial records

• Customer information

• Product plans

• Technology

• Pricing

• Business strategy

• Employee information

Improper disclosure may harm negotiations and create legal exposure.

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WHAT EVIDENCE SHOULD BE PRESERVED?

M&A disputes frequently depend on transaction history and communications. Important records may include:

• Letters of intent

• Term sheets

• Purchase agreements

• Amendments

• Disclosure schedules

• Due-diligence materials

• Data-room documents

• Emails

• Text messages

• Financial records

• Board materials

• Investor communications

• Corporate records

• Contracts

• Intellectual-property records

• Employment records

• Valuation materials

• Negotiation documents

• Closing documents

Parties should preserve electronic evidence once a transaction dispute is anticipated.​

HOW THE WESTMORELAND LAW FIRM CAN HELP

The Westmoreland Law Firm assists businesses, founders, investors, and executives throughout the M&A lifecycle.

The firm can assist with:

• Transaction structuring

• Asset purchases

• Stock purchases

• Mergers

• Acquisition agreements

• Letters of intent

• Due diligence

• Corporate governance

• Intellectual-property review

• Employment diligence

• Contract analysis

• Purchase-price negotiations

• Representations and warranties

• Indemnification provisions

• Investor transactions

• Founder exits

• Succession planning

• Post-closing disputes

• Breach-of-contract claims

• Fraud and misrepresentation claims

• Negotiation, mediation, arbitration, and litigation

A successful M&A transaction requires more than completing the closing. It requires protecting value before, during, and after the transaction.

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This page provides general information concerning mergers, acquisitions, corporate transactions, and business litigation and is not legal advice. Reading this page does not create an attorney-client relationship. Transaction structure, due diligence requirements, contractual obligations, regulatory issues, tax considerations, and available remedies depend on the specific facts of each matter.

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