June 9, 2009
More on “First Drafts: On the Two Yard Line or Closer to Midfield?”
– by Scott Walker, Walker Corporate Law Group
I want to expand on John Jenkins’ recent blog on first drafts to capture a broader – and perhaps more important – point: The initial draft of the acquisition agreement should reflect the ongoing substantive discussions among members of the acquiror’s transaction team regarding risk allocation, purchase price considerations and the overall negotiating strategy.
Perhaps the purchase price is so “good” and any significant risks deemed to be so remote (or containable) that a “seller-friendly” (or “middle-of-the road”) draft is appropriate; on the other hand, perhaps the target has certain significant, uncontainable risks and/or the acquiror perceives it is paying a full purchase price, that the agreement should be aggressively drafted, with broad representations and warranties and indemnification obligations (assuming it is a private deal).
In short, every deal is different, and the role the acquiror’s counsel plays is critical: he must ensure that his client is making an informed judgment with respect to price and terms.