Documents Needed to Buy or Sell a Business

The documents required to buy or sell a business depend on the structure, complexity, and specific terms of the deal. While each transaction varies, most deals involve a principal transaction agreement that governs the core deal:

Merger Agreement for mergers where two companies combine
Stock Purchase Agreement (“SPA”) for stock purchases where the target company’s shares are being acquired
Asset Purchase Agreement (“APA”) for asset sales where the entire target company is not being purchased

These agreements may have slight variations in their titles (e.g., “Agreement and Plan of Merger” or “Securities Purchase Agreement”), but these differences are generally superficial and don’t imply substantive distinctions.

1. Merger Agreements

Merger agreements are used when one company merges into another, resulting in a change of control. Commonly employed in public M&A deals, they address:

Cancellation of the target company’s shares and their conversion into the purchase price.
Mechanics for tendering cancelled shares and distributing the purchase price to shareholders.
Filing of required state documents (e.g., certificates of merger).
Representations and warranties about each party’s ability to complete the transaction.
Regulatory filings, third-party consents, permits, and shareholder approvals.
Termination provisions for specified events, such as material adverse effects.
Indemnification clauses (more common in private M&A deals).

In public transactions, additional protections may include no-shop clauses, break-up fees, and compliance with securities laws.

2. Stock Purchase Agreements (SPAs)

SPAs are the primary agreement for stock purchases, facilitating the transfer of ownership without a merger. Key provisions include:

Terms for transferring stock, including physical delivery of stock certificates if applicable.
Representations and warranties about the target’s business and shares.

SPAs are similar to merger agreements, but are rarely used in 100% acquisitions of public companies.

3. Asset Purchase Agreements (APAs)

APAs govern transactions where assets (rather than stock) are sold. These agreements cover:

Enumeration of transferred assets and liabilities.
Legal instruments to facilitate the transfer (e.g., bills of sale, intellectual property assignments).
Representations about the sufficiency of acquired assets to operate the business.
Special provisions for shared assets used by both the seller and acquired business.

Documents Signed Before the Principal Transaction Agreement

1. Confidentiality Agreement / Non-Disclosure Agreement (NDA)

These agreements protect the confidentiality of discussions, deal terms, and sensitive information shared during negotiations.

2. Letters of Intent (LOIs)

LOIs outline the preliminary terms of a deal, such as purchase price, structure, and contingencies. Though largely non-binding, they simplify negotiations by clarifying key terms early.

3. Exclusivity Agreements

Buyers often request exclusivity agreements to ensure the seller won’t negotiate with other potential buyers for a specified period.

Documents Attached to the Principal Transaction Agreement

Disclosure Schedules

These schedules provide detailed disclosures about the parties involved and qualify specific representations and warranties in the principal agreement.

Documents Needed Between Signing and Closing

1. HSR Filings

Under the Hart-Scott-Rodino Act, certain transactions must be reported to the FTC and DOJ for antitrust review before closing.

2. Third-Party Consents

Some agreements require third-party consent (e.g., from landlords, lenders, or customers) before the transaction can proceed.

Documents Delivered at Closing

1. Legal Opinions

Legal opinions, though less common today, may confirm the accuracy of certain representations, such as a target’s legal standing or compliance with securities laws.

2. Stock Certificates

For stock purchases, signed stock certificates are delivered at closing.

3. Bills of Sale

In asset sales, bills of sale transfer ownership of personal property.

4. Assignment and Assumption Agreements

These agreements transfer contracts, permits, and other assets while assigning related liabilities to the buyer.

5. Escrow Agreements

Escrow agreements secure a portion of the purchase price to cover post-closing indemnification obligations.

6. Transition Services Agreements (TSAs)

TSAs outline temporary support services provided by the seller post-closing, such as IT, logistics, or finance, to ensure a smooth transition for the acquired business.