New York Mergers & Acquisitions Lawyer

Letter of Intent (LOI) and Exclusivity

M&A transactions typically begin with a letter of intent that outlines the proposed deal structure, purchase price, key terms, and exclusivity period. In New York, LOIs are typically non-binding as to the business deal but may contain binding provisions on exclusivity and confidentiality.

A carefully drafted LOI:

• Clearly identifies binding versus non-binding provisions
• Specifies the duration of exclusivity (preventing the seller from shopping the deal to other buyers during the due diligence period)
• Identifies conditions to closing (regulatory approvals, financing, due diligence satisfaction)
• Allocates deal expenses

New York courts take the binding/non-binding distinction seriously. Loosely worded LOIs have produced disputes about whether the parties were obligated to proceed — disputes that the deal’s parties and their attorneys would have preferred to avoid.

Due Diligence

Due diligence is the buyer’s systematic investigation of the target business before committing to closing. In a New York M&A transaction, due diligence covers:

Corporate and organizational records. NY DOS good standing certificate, articles of incorporation/organization, all amendments, bylaws/operating agreement, board and shareholder meeting minutes, capitalization table (verifying ownership of all equity interests).

Contracts. Material contracts — customer agreements, vendor agreements, leases, loan agreements — including review of assignment and change-of-control provisions. In a stock deal, contracts that permit the counterparty to terminate or renegotiate upon a change of control can fundamentally affect deal value.

Litigation. Pending and threatened lawsuits, regulatory proceedings, NLRB charges, EEOC complaints, and workers’ compensation claims. In New York, a search of the NY Office of Court Administration’s eCourts system provides comprehensive litigation history.

Tax compliance. Federal, state, and New York City tax returns; correspondence with the IRS, NY Department of Taxation and Finance, and NYC Department of Finance. New York State and City sales tax compliance is a frequent source of unpleasant post-closing surprises.

UCC searches. Article 9 lien searches at the NY Department of State identify security interests in the target’s assets — critical for asset purchases where the buyer needs to acquire assets free of encumbrances.

Employment. Worker classification compliance, outstanding wage claims, NY WARN Act obligations, key employee agreements and non-competes.

The Purchase Agreement

The definitive purchase agreement — whether an asset purchase agreement, stock purchase agreement, or merger agreement — is the governing document of the transaction. Key provisions:

Representations and warranties. The seller (and sometimes buyer) makes factual representations about the business, its assets, liabilities, contracts, litigation history, and compliance with law. Breaches of representations and warranties are typically the most common source of post-closing disputes.

Indemnification. The mechanisms by which the parties compensate each other for losses resulting from breaches of representations, warranties, or covenants. Indemnification provisions in New York M&A deals typically include survival periods, deductibles (or “baskets”), and caps on total indemnification liability.

Closing conditions. Conditions that must be satisfied before either party is obligated to close — representations remaining true, required regulatory approvals, absence of material adverse change.

Post-closing covenants. Non-compete and non-solicitation obligations of the seller, transition assistance obligations, earn-out provisions tied to post-closing performance.

Dissenter’s Rights Under the BCL

When a merger is proposed, BCL § 623 provides dissenting shareholders a statutory right to receive the judicially determined “fair value” of their shares rather than the merger consideration. This appraisal right protects minority shareholders who believe the merger undervalues their shares. The procedure requires strict compliance with BCL § 623’s notice, objection, and filing requirements — failure to follow the procedure waives the right.

Appraisal proceedings in New York involve judicial valuation of the business using accepted valuation methodologies (DCF analysis, comparable company analysis, comparable transaction analysis). These proceedings can be complex and expensive — but for a dissenting shareholder who believes the merger price materially undervalues their shares, they can produce a significantly better outcome.

Post-Closing Integration and Disputes

Not all M&A transactions proceed smoothly after closing. Common post-closing disputes include working capital adjustment disputes (where the agreement tied final purchase price to closing-date working capital), indemnification claims for undisclosed liabilities, and earn-out disputes when the post-closing business performance falls short of agreed metrics.

We help clients navigate post-closing disputes efficiently — through the contractual dispute resolution mechanisms in the purchase agreement and, when necessary, through Commercial Division litigation.