Mergers & Acquisitions Attorney in Chicago

Key Stages of a Merger or Acquisition

An M&A transaction commonly moves through preliminary evaluation, due diligence, negotiation, definitive agreements, closing, and post-closing work. The sequence and timing depend on the businesses, transaction structure, financing, regulatory requirements, and negotiated terms.

Preliminary Evaluation

Initial review can clarify the parties’ objectives, the assets or ownership interests involved, financing considerations, and possible structures. A letter of intent may record preliminary terms such as price, transaction form, exclusivity, confidentiality, and anticipated closing conditions.

Due Diligence

Due diligence investigates a business before the transaction is completed. The review may cover financial information, material contracts, leases, intellectual property, employment arrangements, litigation, licenses, regulatory compliance, financing documents, and ownership records.

Definitive Agreements & Closing

The definitive agreement establishes the binding transaction terms. It may address purchase price, representations and warranties, covenants, indemnification, escrows or holdbacks, closing conditions, and transition arrangements. Closing work can include approvals, third-party consents, financing documents, transfers, and required filings.

Post-Closing Obligations

Some responsibilities continue after ownership changes, including purchase-price adjustments, indemnification claims, escrow releases, consulting or employment arrangements, restrictive covenants, and transition duties established by the agreement.

Choosing an Asset Purchase, Equity Purchase or Merger

The transaction form determines what transfers and how the parties address control, liabilities, contracts, and consent requirements. Tax treatment, financing, regulatory obligations, and the entities involved can also influence the structure.

Common transaction structures include:

• Asset purchase: The buyer acquires selected assets and assumes specified liabilities. Contracts, leases, licenses, and permits may require separate assignments or third-party consent.
• Equity purchase: The buyer acquires ownership interests in the existing entity. Due diligence therefore examines the company’s contracts, liabilities, governance, and continuing obligations.
• Statutory merger: Entities combine under an applicable corporate statute. Required steps may include board or shareholder approval and state filings, depending on the entities and governing law.

Illinois Filing Requirements for Corporate Mergers

The Illinois Business Corporation Act establishes procedures for mergers and consolidations involving Illinois corporations, including board approval of a plan of merger or consolidation. Other approval requirements depend on the entities and circumstances of the transaction.

The Illinois Secretary of State provides Articles of Merger, Consolidation or Exchange for business corporations, as well as separate forms for certain transactions involving corporations and limited liability companies. Because the documents and approval process vary by structure, filing requirements must be evaluated for each transaction.

How M&A Agreements Allocate Transaction Risk

Buyers and sellers often have competing priorities involving price, control, liability, seller involvement, and known or discovered business risks. The definitive agreement allocates those risks through negotiated provisions.

Key risk-allocation provisions may include:

• Representations and warranties: Statements about the business, authority, contracts, finances, liabilities, and other transaction facts
• Indemnification: Procedures for seeking compensation when specified losses or breaches occur
• Liability limits: Negotiated caps, thresholds, survival periods, exclusions, escrows, or holdbacks
• Closing conditions: Requirements that must be satisfied or waived before closing
• Consent provisions: Requirements arising from contracts, leases, lenders, licenses, or ownership agreements

Careful drafting becomes particularly important when the parties expect an ongoing relationship. Employment, consulting, transition, financing, or property arrangements may create duties that remain separate from the ownership transfer.