Negotiation and drafting of transaction documentation | In Principle

Go to content
Subscribe to newsletter
In principle newsletter subscription form

Negotiation and drafting of transaction documentation

After gaining information about the target, the parties begin negotiations toward a mutually satisfactory price (or mechanism for calculating the price) and transaction structure (i.e. the terms under which ownership of the target will pass to the buyer).

A frequently encountered model is to sign an undertaking or conditional agreement which defines the conditions that must be fulfilled before signing of the final agreement transferring ownership of the target to the buyer or direct passage of the target to the buyer. In practice the parties often decide to sign a preliminary agreement. If it meets the requirements for the validity of the final agreement (for example, in the case of a share sale agreement, if it is made in writing with notarised signatures), and one party refuses to conclude the final agreement, the other party can enforce conclusion of the final agreement through the courts.

Conditions may include, for example, obtaining permission for a concentration or for acquisition of real estate by a foreigner, or failure to exercise a right of pre-emption by an authorised authority in the case of agricultural and forest land. Other conditions may arise under the business terms agreed between the parties, e.g. prior restructuring of employment or financing of the business.