LEGAL INFORMATION NOTICE: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and does not constitute legal advice concerning a proposed acquisition, merger, sale, or other transaction. M&A transactions involve legal, tax, financial, regulatory, antitrust, employment, intellectual-property, and operational considerations that vary by transaction and jurisdiction. Consult qualified transaction counsel and other appropriate professionals.

“The purchase price is only one number in an acquisition.”

The real transaction can look more like:

PRICE

DEBT

WORKING CAPITAL

TAX

FEES

LIABILITIES

INTEGRATION COST

REMEDIATION

=

TRUE DEAL ECONOMICS

1. A signed letter of intent does not necessarily mean a deal will close.
2. Purchase price is not the same as total transaction cost.
3. Enterprise value and equity value are different concepts.
4. Debt can materially change deal economics.
5. Working-capital adjustments can change closing proceeds.
6. Quality-of-earnings analysis can challenge reported profitability.
7. Customer concentration can create risk.
8. Key-person dependence can reduce value.
9. Contracts may require consent.
10. Licenses and permits may require attention.
11. Intellectual-property ownership should be verified.
12. Employment obligations can transfer or create exposure depending on transaction structure and law.
13. Litigation and regulatory matters require investigation.
14. Tax liabilities can materially change economics.
15. Environmental liabilities can matter in relevant industries.
16. Cybersecurity weaknesses can become acquisition liabilities.
17. Data privacy obligations require due diligence.
18. Representations and warranties allocate risk between parties.
19. Indemnification provisions can materially affect post-closing risk.
20. Escrows and holdbacks can affect seller proceeds.
21. Earnouts can create future disputes.
22. Financing may depend on due-diligence findings.
23. Antitrust review may be required for certain transactions. The FTC explains that qualifying mergers may be subject to premerger notification and government review.
24. Integration costs can destroy expected synergies.
25. The key question is: “What will this acquisition actually cost—and what risks am I inheriting?”

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C. PREMIUM BUYER CHECKLIST

1. DEAL STRUCTURE

☐ Asset purchase
☐ Stock/equity purchase
☐ Merger
☐ Other structure
☐ Purchase price
☐ Debt treatment
☐ Working-capital mechanism

2. FINANCIAL DUE DILIGENCE

☐ Revenue
☐ Gross margin
☐ EBITDA/operating earnings
☐ Cash flow
☐ Accounts receivable
☐ Accounts payable
☐ Debt
☐ Capital expenditures
☐ Customer concentration
☐ Quality of earnings

3. LEGAL DUE DILIGENCE

☐ Material contracts
☐ Litigation
☐ Regulatory matters
☐ Employment
☐ Intellectual property
☐ Data/privacy
☐ Insurance
☐ Licenses
☐ Permits
☐ Environmental matters where applicable

4. TRANSACTION DOCUMENTS

☐ LOI
☐ Purchase agreement
☐ Disclosure schedules
☐ Representations
☐ Warranties
☐ Indemnification
☐ Escrow
☐ Holdback
☐ Earnout
☐ Closing conditions

5. COMPETITION

☐ Market definition
☐ Competitor overlap
☐ Market share
☐ Required filings evaluated
☐ Regulatory review assessed

The FTC explains that Section 7 of the Clayton Act addresses mergers and acquisitions where the effect may substantially lessen competition or tend to create a monopoly, and that premerger notification can allow agencies to review qualifying transactions before closing.

6. INTEGRATION

☐ Employees
☐ Customers
☐ Technology
☐ Systems
☐ Branding
☐ Facilities
☐ Suppliers
☐ Operations
☐ Cybersecurity
☐ Data migration

7. RED FLAGS

☐ Seller refuses reasonable diligence
☐ Material contracts unavailable
☐ Revenue cannot be reconciled
☐ Excessive customer concentration
☐ Undisclosed litigation
☐ Unclear IP ownership
☐ Unexplained add-backs
☐ Unresolved tax issues
☐ Aggressive valuation assumptions
☐ Deal depends on unverified synergies

FINAL QUESTION

If the expected synergies never materialize, is this still a financially rational acquisition?