M&A deal structure: terms that move risk
What to align before the SPA: price mechanics, payments, closing conditions, warranties, liability, and transition work.
M&A structure answers a practical question: who carries risk between signing, payment, and actual transfer of control. If that answer is missing from the term sheet, it usually returns later in the SPA, disclosure letter, or closing conditions.
Choose the deal object, not only the price
A share deal and an asset deal allocate corporate, tax, contractual, and operational risk differently. In a share deal, the buyer usually enters the company with its history. In an asset deal, the parties can select assets and liabilities more precisely, but often need to re-paper contracts, permits, IP, and operating links.
For a technology business, check what is actually moving: shares, code, domains, trademarks, customer contracts, data, licenses, team members, or a product line. Rights to the product should not be assumed to follow the commercial headline.
Fix the price mechanics
Fixed price, completion accounts, locked box, earn-out, escrow, and deferred payment solve different problems. Fixed price is simpler but may not reflect changes before closing. Completion accounts allow a closing-date adjustment but need a clear method. Earn-out moves part of the price into the future and can create disputes over metrics.
Before long-form drafting, align the formula, data sources, timing, objection process, and access to management information. Otherwise the financial model can turn into a legal dispute after signing.
Make closing conditions measurable
Conditions precedent should be testable. A useful condition answers three questions: who performs the action, what document proves completion, and what happens if the deadline is missed. Broad conditions give parties leverage, especially when financing, market conditions, or the target business changes.
Critical tracks usually include corporate approvals, counterparty consents, regulatory notices, no material adverse change, transfer of IP documents, and closure of due diligence gaps.
Limit the warranty dispute
Representations and warranties work only with disclosure, liability limits, and a claim process. The seller needs a way to disclose known exceptions. The buyer needs more than a clean sentence; it needs a workable path to bring a claim if the statement proves wrong.
Discuss caps, baskets, survival periods, de minimis thresholds, and specific indemnities before polishing wording. These parameters often matter more than drafting style because they define the real cost of an error.
Put transition work into the plan
Post-closing covenants should cover what cannot be finished by closing: notices, registrations, access migration, contract updates, team integration, and product support. Without owners and dates, the buyer can receive an asset that is difficult to operate.
There is no universal structure. The right structure shows which risks stay with the seller, which risks the buyer accepts, and which risks should be handled through price, escrow, a closing condition, or a separate covenant.