Speaker 1: Our firm works with clients in industries ranging from manufacturing, health care, to logistics and technology. We advise both buyers and sellers in a variety of corporate transactions and other general business matters.

Speaker 2: There are three principal methods of acquiring a business. Acquisition of the target company's stock, acquisition of the target company's assets, or a direct or indirect merger of the target company into the buyer. The best method to use in any given transaction is going to have to account for a lot of different things. Commercial considerations, legal and tax implications, corporate consents, and structural and timing issues.

Speaker 1: One of the most important terms of any deal is the purchase price, both the amount and how the payment will be made. A company may be purchased using cash, stock, or a combination of the two.

Speaker 2: There's a considerable lag time between when that initial analysis of the company's worth is done and when the transaction is actually closed. To account for that significant lag time, parties will agree for some sort of adjustment to the purchase price that is applied post-closing. As a result, purchasers and sellers often utilize purchase price adjustment mechanisms to protect themselves in the event that the business is not worth as much on the closing date as it was during the initial analysis.

Speaker 1: Many purchase agreements contain provisions that allow buyers to withdraw from the deal if there is an unexpected event that hurts the value of the transaction during the interim period. Although these material adverse change causes are rarely triggered, they often give the buyer more leverage to negotiate a change to the price or other terms of the transaction. As business technology has become more complex, the evaluation of cybersecurity risks has become an important part of the due diligence process of most transactions, particularly those that revolve around intellectual property such as software or customer data. Oftentimes with larger deals or transactions in regulated industries, there will be a period of time, sometimes several months, between the signing and the closing. During this interim period, the parties will work to obtain regulatory approvals and fulfill other closing conditions. It's important for the parties to negotiate in advance how the target company will run its business during this period and what happens if something goes wrong. The seller will want to retain as much flexibility as possible in its operations, while the buyer will want to restrict any actions outside the ordinary course of business, such as major capital expenditures or increases in executive compensation.

Speaker 2: Frequently, buyers and sellers allocate risks for post-closing issues through incorporation of an indemnification clause. Indemnification clauses detail the rights of the buyer and seller following violations of reps, warranties, covenants, or occurrences of liabilities post-closing. Indemnification clauses often reflect the relative negotiating power of the buyer and the seller, as well as market trends within a given industry. Fundamentally, in any transaction, a major component of closing the deal is going to be the allocation of risk. A remedies section, and more specifically, an indemnification section, is intended to address allocation of that risk.

Speaker 1: Whether we're helping our clients navigate a sophisticated acquisition or assisting them with general corporate matters, we know how to get the deal done. If your business has questions or you'd like to learn more about our services, please reach out to us.