How to Navigate Merger and Acquisition Agreements to Ensure Compliance

M&A agreements need to be approached carefully, and ideally with the advice of an Austin, TX corporate law attorney. With the help of a lawyer and a careful approach, you can mitigate risks, stay in regulatory compliance, and protect all parties to the mutual benefit of everyone.

How to Navigate Merger and Acquisition Agreements to Ensure Compliance

1. Engage an Experienced Corporate Law Attorney

Start by hiring an M&A attorney who is familiar with Texas law and the local courts and business situation. A good attorney will be an asset at every stage, from planning to closing, and can make sure you’re in compliance with all federal and state-specific requirements.

The state of Texas actually recommends that you work with attorneys since not all scenarios are covered by the Secretary of State’s standard forms. Your attorney will also handle all negotiations, do a risk assessment, let you know the tax implications, and look into any ESG (environmental, social, governance) considerations that may apply.

2. Decide the Transaction Structure

Is this a merger, where entities combine; an acquisition, where stock is purchased or assets are sold; an interest exchange; or a conversion? Under TBOC Sec. 10.001–10.010, mergers must be permissible under your governing documents and laws. Asset sales generally don’t require owner approval unless you’re talking about selling all or substantially all assets, or unless something different is specified in business documents. Be careful that, as you go through with this, no owner becomes personally liable without consent.

3. Conduct Thorough Due Diligence

Have your lawyer carefully review the target company’s financials, operations, legal compliance history, contracts, intellectual property, employment agreements, and regulatory issues. Key risks to look for include any ongoing litigation, issues with compliance, or environmental liabilities. Don’t forget to check that the tax history is solid, too.

4. Prepare the Plan of Merger or Acquisition Agreement

Your attorney will help you draft a written plan. The precise plan will depend on the type of transaction, but generally it should include the names of parties, the conversion/exchange terms, governing documents for the new or surviving entity, and liability allocation. Some of the key clauses in these agreements include: 

• Representations and Warranties
• Covenants
• Conditions to Closing
• Indemnification
• Termination Rights

5. Get Approvals and Consents

The type of approval you’ll need depends on the type of company involved. For corporations, you’ll usually need board approval and then shareholder votes (if required). For LLCs, the approval procedure should be laid out in the governing documents. You’ll also need third-party consent in some cases, like from lenders, vendors, or regulations.

6. File with the Texas Secretary of State

Finally, your lawyer will help you submit a Certificate of Merger/Exchange/Conversion with the state. This needs to include the plan details, approvals certification, and franchise tax confirmation.

Talk to Us for Help in Austin, TX

To make sure your transaction goes smoothly, contact the Artie Pennington Law Offices in Kyle, TX for a free 15-minute consultation and help anywhere in the larger Austin area. 

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