Module II·Article III·~2 min read
Mergers and Acquisitions (M&A): Legal Aspects
Corporate Law
Turn this article into a podcast
Pick voices, format, length — AI generates the audio
Types of M&A Transactions
Merger — the combination of two companies into one. It can be a merger of equals or an acquisition (one company is absorbed by another). In Russia, this is a reorganization in the form of a merger or accession.
Acquisition — one company acquires control over another. It can be friendly (with management consent) or hostile (hostile takeover — through stock purchases or public tender offer).
Share deal — acquisition of shares/interests in a company. The buyer acquires the company along with all assets AND liabilities (including hidden ones).
Asset deal — acquisition of specific assets. The buyer can choose what to acquire. This protects against "inheriting" problems.
Due Diligence in M&A
Due Diligence (DD) — a thorough review of the company before purchase. Includes:
- Legal DD: review of corporate documents, contracts, litigation, intellectual property, regulatory permits
- Financial DD: analysis of financial statements, quality of assets, liabilities
- Tax DD: tax risks, transfer pricing
- Commercial DD: market position, client base, competitors
- IT DD: technological infrastructure, data, cybersecurity
Red flags in Legal DD: lawsuits (especially tax-related), unresolved rights to key assets, excessive dependence on a single client/supplier, violations of labor law.
Key M&A Documents
NDA (Non-Disclosure Agreement) — confidentiality agreement, the first step. Protects sensitive information during negotiations.
Term Sheet / LOI (Letter of Intent) — preliminary agreement on the main parameters of the transaction (price, structure, conditions). Usually non-binding but provides a framework.
SPA (Share Purchase Agreement) — main share purchase agreement. Key elements: price and payment mechanism (fixed, with working capital adjustment, earn-out), representations and warranties, indemnities, closing conditions (Conditions Precedent), non-compete.
Escrow — part of the price is placed in an escrow account for 1–2 years to cover potential buyer claims on the seller’s representations.
Antitrust Approval
Large transactions require prior approval from antitrust authorities: the Federal Antimonopoly Service (FAS) of Russia (when threshold values for revenue/assets are exceeded), the European Commission, FTC/DOJ in the USA. The criterion is a significant restriction of competition.
Practical Assignment
Suppose you represent a private equity fund that wants to purchase 70% of a Russian software producer. Compile a list of key questions for Legal Due Diligence (at least 15 questions), grouping them by category.
§ Act · what next