Often overlooked during deal negotiation, the items on this checklist can prove critical after closing. The following list is not exhaustive, but is intended to be a useful guide for mitigating post-closing headaches.

Gather M&A Market Data

When: Term sheet negotiations
Why: An experienced shareholder representative should provide data on deal terms and post-closing claims to help you mitigate post-closing risks. See our insights.

Discuss selection of escrow bank with buyer

When: Term sheet negotiations
Why: The right choice can deliver tens to hundreds of thousands of dollars in reduced expenses and increased yield while providing a higher level of service. See our escrow solutions for options.

Collect personal email addresses for all stock and option holders

When: Due diligence
Why: 
The shareholder representative and escrow bank must communicate with stakeholders in order to make payments, often for years after closing. Company email addresses may become inactive.

Collect cost basis and acquisition date for all shares issued

When: Due diligence
Why: 
Buyers and banks must report this information when they pay selling shareholders. This information will be required from seller’s management at the time of the transaction.

Reevaluate NDAs with employees and directors

When: Due diligence
Why: 
Existing NDAs may potentially prevent post-closing communication between the shareholder representative and employees or directors. Review and discuss with counsel.

Review past sales tax practices

When: Due diligence
Why: Sales tax issues can be difficult to manage. Review the company’s sales tax policies pre-closing, and consider discussing with tax advisors and buyer to minimize post-closing risks.

Establish an expense fund

When: By signing
Why: The existence and mechanics of an expense fund can increase the ease and speed of paying post-closing expenses.

Clarify who makes post-closing payments to option holders, and how

When: By signing
Why: 
If the buyer is to make payments, be sure seller’s account with its payroll processor remains open and available to buyer, in order to avoid tax document and reporting problems. If the paying agent is to make payments, engage them early to make all post-closing payments. See our compensation payments solution.

Clarify who is responsible for withholding taxes on payments to be treated as compensation

When: By signing
Why: This will avoid any dispute regarding which party should be responsible for the employer’s matching portion of any withholding taxes.

Prepare allocation spreadsheet for closing and post-closing payments

When: By signing
Why: 
When errors are discovered in allocation spreadsheets at the last minute, it can delay shareholders’ payments.

Deliver a copy of your data room to your shareholder representative

When: By signing
Why: This will guarantee sellers have access to diligence materials should a dispute arise post-closing. Document the ongoing rights of the rep and shareholders to use it.

If your transaction will leave a surviving trust or company (e.g., after an asset sale), consider who will manage it

When: By closing
Why: 
Administering surviving shell entities often involves more work than anticipated.

Identify which board members and management will be involved following closing

When: By closing
Why: 
The input of former managers and directors can be critical when post-closing disputes arise. Identify potential conflicts (e.g., management working for buyer) and prepare in advance with counsel and the shareholder representative. 

 

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