Timothy Goddard

Thanks, Elon. Now to introduce our next section I would like to turn things over to Corum's CEO and founder, Bruce Milne.

Bruce Milne

Today's special presentation is on merger agreements. We'll hear from a panel of experts on best practices for definitive agreements in tech M&A. These agreements are prepared during due diligence, part of the eight steps for an optimal outcome. This is stage six, which covers verification of statements, opinions needed, the establishment of the confidential data room, more due diligence, and finally, the completion of the definitive agreement, the merger agreement and attachments, which we're talking about today.

Due diligence and the drafting of these agreements is done simultaneously after you have created your letter of intent from your negotiation. You have to assess risks and problems; those have to feed into your contract. You have to respond to the buyer's checklist, full disclosure, complete transparency. Are you ready? Here's a full list, it'll be online. Included corporation legal structure. Financial data, including three-year projections, tax status contracts, both from buyers and with your customers. Regulatory, insurance, litigation, or threats of litigation. Employee relations or problems. A big one, intellectual property. And finally, markets and competition. Here to lead our panel is legal expert, Joel Espelien.

10 Critical Elements of M&A Agreements

Joel Espelien

Thanks, Bruce. Understanding the process is critical. Now we're gonna walk through 10 critical elements of M&A agreements with Corum's worldwide team of deal makers, who collectively have seen more deals, and done more deals than anyone. We start with Ivan Ruzic in New York, on the interplay between financial statements and the definitive agreement, Ivan?

Ivan Ruzic

One of the primary areas of the contract, reps and warranties and related due diligence, is financial. You need to guarantee past and provide reasonable guidance on future plans. Make sure the buyer understands how your books and records are maintained early in the due diligence process. This little might surprise us in the drafting of the contract. Working capital and how it's calculated is in most contracts and has been one of the major areas of concern lately, especially with deals involving private equity. Again, no surprises. Discuss this early in the process. On budgets, be realistic and conservative for the coming year. Missing targets can delay, reduce, or even kill the deal. And finally, work with your accounting advisor to understand where you may have financial exposure either in the accuracy of your numbers or in liability. This will become useful information when negotiating reps and warrants.


This is a segment from Tech M&A Monthly: Best Practices for Definitive Agreements in Tech M&A (August) webcast. For more information, please visit Corum Group's Software M&A Webcast Archive.