Mergers & Acquisitions

It depends which side you are on, and the two sides want opposite things. Buyers want assets: they select what they acquire, leave unassumed liabilities behind, and get a tax basis step-up that generates future depreciation and amortization deductions. Sellers want equity: one clean transaction, generally capital gain treatment, and a genuine exit from the liabilities.

Structural facts often decide it regardless of preference. If key contracts, licenses or permits cannot be assigned, or assignment requires consents that are impractical to obtain, an equity purchase may be the only workable path. If the seller has known liability exposure the buyer will not accept, an asset purchase may be the only one.

Where preferences conflict and neither structure is compelled, the resolution is usually money — the party whose preferred structure prevails pays for it in the price. Settle this in the letter of intent. Reopening it later costs both sides.

Partly. Price, structure and terms are almost always expressly non-binding — the LOI is a framework, not a contract to sell. But several provisions are binding and matter a great deal: exclusivity, confidentiality, and who bears expenses if the deal dies.

Exclusivity is the one sellers underestimate. Signing a no-shop takes you off the market for sixty or ninety days, and the buyer knows it. Any leverage you had from a competing bidder is gone the moment you sign, which is why every term you care about should be in the LOI rather than deferred.

Be precise about what is binding. Poorly drafted letters of intent produce genuine litigation over whether a binding agreement was formed, and Missouri courts will look at the language rather than what anyone assumed.

For a lower-middle-market business, typically three to six months from letter of intent to closing. Roughly four to eight weeks of diligence, four to six weeks negotiating the definitive agreement while diligence finishes, then closing mechanics.

The reliable delays are third parties: landlord consents, lender approvals, licensing and regulatory transfers, and buyer financing. Every one is outside both parties’ control and every one takes longer than the schedule assumes.

What genuinely shortens a deal is seller preparation. A seller who has organized contracts, cleaned up the cap table, resolved the IP assignments and assembled financials before going to market can cut months out — and, more importantly, avoids the mid-diligence discoveries that reprice deals.

Most deals are priced on a cash-free, debt-free basis assuming the business is delivered with a normal level of working capital. The adjustment trues that up: the price rises if actual working capital at closing exceeds the target and falls if it is short.

The fight is over the target. It is usually a trailing twelve-month average, and a seasonal business can produce very different answers depending on the months chosen and the closing date. Model it before you agree to it.

Also negotiate the mechanics: who prepares the closing statement, on what accounting principles, how long the other side has to object, and who resolves a dispute. An independent accountant as tie-breaker, with the scope of their review defined, prevents a modest arithmetic disagreement from becoming litigation.

Only with clear eyes. Earnouts exist to bridge a valuation gap — the buyer will not pay for growth it has not seen, the seller will not sell without credit for it. They are also the most litigated provision in acquisition agreements.

The structural problem is that the buyer controls the business during the measurement period, and every ordinary decision — investing in headcount, reallocating overhead, integrating operations, changing accounting — can reduce the metric. Sellers routinely discover their earnout was defeated by decisions that were entirely defensible as business judgment.

If you use one: prefer revenue or another metric the buyer cannot easily manipulate over EBITDA; define it precisely and in writing, including accounting treatment; include covenants about how the business will be operated; grant audit rights; and keep the period short. Two years beats five.

A portion of the purchase price held by a third party after closing as the buyer’s source of recovery for indemnity claims. Common ranges run from five to fifteen percent of price, held twelve to twenty-four months, though it varies with deal size and risk profile.

It exists because indemnification without a fund is a promise to sue. A buyer who discovers an undisclosed liability eighteen months later, with no escrow, is litigating against a seller who has already distributed the proceeds.

Sellers negotiate this hard, and reasonably. The alternatives worth raising are a smaller escrow paired with representation and warranty insurance, a shorter survival period, or a tiered release — half at twelve months, the balance at twenty-four.

A policy that covers breaches of the seller’s representations, so the buyer recovers from an insurer rather than from the seller. It has moved steadily down-market and is now realistic on transactions considerably smaller than it once was.

The appeal is on both sides. Sellers get most or all of the price at closing with little or no escrow and a clean exit. Buyers get a solvent counterparty and a policy limit that frequently exceeds what the seller could pay.

The trade-offs: a premium as a percentage of coverage, a retention the parties still share, an underwriting process that adds time, and exclusions — known issues, and often specific categories the underwriter dislikes. Price it early enough that the diligence and underwriting run in parallel rather than in sequence.

In an equity purchase, yes — you bought the company with its history intact, and your protection is contractual: representations, indemnification, escrow and insurance.

In an asset purchase the default is no, but the exceptions matter. Liabilities you expressly or implicitly assume, de facto merger or mere continuation where you are substantially the same business, fraudulent transfer, state tax successor rules, environmental liability under CERCLA, and certain employment and benefit obligations can all reach a buyer regardless of the agreement.

The practical protections are diligence, a clearly limited assumption of liabilities, tax clearance certificates and holdbacks, a phase I environmental assessment where real property is involved, and an indemnity backed by something real. All of them are cheaper than the exception you did not screen for.

Almost certainly not. Hart-Scott-Rodino premerger notification turns on size, and the FTC set the 2026 minimum size-of-transaction threshold at $133.9 million, effective 17 February 2026. Below it, there is no filing, no waiting period and no fee.

Confirm rather than assume, because the tests count more than headline price and the parties’ size matters as well. But the overwhelming majority of Missouri business sales are nowhere near the threshold.

Separately, and regardless of size: antitrust law still applies to how the parties behave before closing. Competitors exchanging competitively sensitive information, or coordinating pricing during diligence, create real exposure. That is what clean-team protocols are for.

More than most sellers expect. Typically a non-competition and non-solicitation agreement — the buyer is purchasing goodwill and will not pay for it if you can compete tomorrow. Missouri enforces these in the sale-of-business context, and considerably more readily than in a bare employment relationship.

Also common: a transition services or consulting arrangement keeping you involved for three to twelve months, personal indemnification obligations backed by the escrow, and confidentiality that survives indefinitely.

Negotiate scope and duration deliberately, especially if you intend to work again. A non-compete drafted broadly enough to cover an entire industry may prevent the next chapter of your career, and that is a term you can trade for, not one you have to accept as written.

Start two to three years out if you can. Clean financials that a buyer’s accountant can rely on — reviewed or audited if the size justifies it — are the foundation, and personal expenses run through the company are the first thing to stop.

Then the legal cleanup: written assignments for all intellectual property, a cap table that reconciles to actual issuances, key contracts in writing and assignable, employees properly classified, restrictive covenants drafted to Missouri standards, corporate records complete and consistent.

Finally, the strategic work: reduce customer concentration, document the processes that currently live in your head, and develop management who can run the business without you. Buyers pay materially less for a company that depends on one person, and that discount is usually larger than everything the legal cleanup costs. See business sales and exit planning for the seller’s side in full.

It scales with the deal, but far less than proportionally — a $2 million transaction and a $20 million transaction involve similar documents. Expect the letter of intent stage to be modest, with the bulk of the cost in diligence and the definitive agreement.

The largest cost driver is not size but disorganization. A seller whose records are incomplete generates fees on both sides, because the buyer’s counsel bills for asking and yours bills for reconstructing.

Where scope is knowable, this work is quoted flat-fee before it starts. Where it is not — because the diligence findings are unknown — it is hourly with an estimate and a running conversation, not a surprise at the end.