The following article originally appeared in the April 2009 edition of The Myers Report newsletter published by the firm.


The “Urge to Merge” – Part IV: Tying the Merger Knot

By James E. Robinson, Esq.


After the parties have completed their due diligence and agree that they were meant to be together, the next step is to negotiate a written contract.  The contract will address a variety of issues and memorialize what has been agreed to.

Primary Contract Issues

  • Structure of the Transaction

Will the assets of the company be sold or will its stock/membership interests be sold?  There are different tax and liability issues depending on the choice.

  • Purchase Price

How much will be paid for the business?  What percentage of the purchase price will be paid in cash at the closing?  How long will the payout of the balance be and at what rate of interest?  Will the future revenues of the company affect the future payments of the purchase price?  Will there be personal guarantees?  Any other security?

  • The Role of the Selling Principal After the Sale

Will the selling principal “cash out” and walk away, or will there be continued involvement with the business – whether as a principal, employee or consultant?

  • Compensation and Benefits

Will the principals and key employees get employment agreements?  What will be their new roles, titles, salaries, benefits and perks?

Beyond these, there are any number of issues that need to be addressed

  • Who will be responsible for completing ongoing jobs or projects of the company that is acquired?
  • Who owns the accounts receivable and how will they be collected?
  • Is there an office lease and/or equipment leases that need to be assigned to the acquiring company?
  • How will the parties’ insurance coverages be coordinated? (This is an especially important consideration when licensed professional practices such as architects, engineers, attorneys or the medical professions merge.)

The Negotiation Tightrope

Negotiations will be a delicate proposition in this type of transaction,  especially if after the deal is finalized you’ll be working closely for years to come with the people you were vigorously negotiating with on the other side of the table.

What Winning Negotiating Strategies Can You Use to Increase Your Chances For a Successful Outcome?

Remember, in all negotiations, you are playing a “role”.  Treat all negotiation comments and remarks as addressed to your “role”; do not let them affect your “identity”.  That way, you will be less inclined to take comments personally, and more effective in your negotiations.

  • Let your Lawyer or Accountant be the “Bad Guy”

A tried and true approach is to let your attorney (or perhaps your accountant in the case of financial issues) be the “bad guy” and raise issues or haggle over details.  In many cases this can help the principals remain above the fray and maintain a good relationship.

  • Be Mindful of the Other Person’s Negotiation “Style”

Also critical to your success in the negotiations is being mindful of the other side’s negotiation “style”.  Some people start from a very reasonable, middle-of-the-road position.  If those on the other side are of a like mind, it can make for quick completion of the negotiations.  Other people have a negotiation style where they start from a position very much biased in their favor and insist on a hard bargain.  It won’t always be possible to overcome the other party’s approach in these instances, but understanding it can help you avoid taking it as a personal offense and make you more effective.  React to their strategies and commentaries as if they are addressed to your role in the transaction, not your identity – that will keep your emotions out of the mix.

  • Be Open to Understanding the Other Side’s Point of View

Another simple way to avoid discord is to refrain from taking hard-line positions.  Instead, encourage the other side to explain why a particular issue is so important or how it affects their business.  Here again, understanding can go a long way toward facilitating a successful outcome.

Once the contract and employment agreements have been signed, there will be several related documents and schedules to finalize and update.  Then, you’ll be almost to the altar, where you can begin to look forward to closing and beyond.


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Please note that this article is intended only as a general discussion of issues pertaining to the sale or merger of a business and that it should not be taken as creating an attorney-client relationship or as legal advice with respect to any particular person, business or situation.  Circumstances and the applicable legal principles vary and you should consult with an attorney and/or other professionals regarding the facts of your particular situation.