Glossary 18 – Key legal documents in Private Equity and M&A transaction

Besides knowledge and skills in domain of finance, dealmakers are required to have good understanding about the key legal documents in private equity (PE) and Mergers and Acquisitions (M&A) transactions. These documents are integral to ensuring that both parties’ interests are protected and that the transaction proceeds smoothly and legally. Below is the non-comprehensive list of these key documents:

1. Confidentiality Agreement (or Non-Disclosure Agreement): An agreement to keep information exchanged during the evaluation process confidential. This is the document to kick-off the process of all transactions.
2. Term Sheet/Letter of Intent (LOI): A non-binding document outlining the preliminary terms and conditions of the investment or the proposed transaction, subject to further due diligence and negotiation outcomes. The Terms Sheet and LOI also determines the time length of the exclusivity and the due diligence period.
3. Subscription Agreement: An agreement wherein the investor agrees to purchase newly issued shares from the company. This document is used for primary transaction.
4. Share Purchase Agreement (SPA): The main document in the transaction, detailing the sale terms, including purchase price, number of shares sold, payment terms, representations, warranties, and indemnities. This document is used for secondary transaction.
5. Investment Agreement: This is a comprehensive agreement detailing the terms of the investment, including the amount, valuation, and rights of the investors. This document is normally used when there are more than one investment instrument used in the transaction.
6. Shareholders’ Agreement: this document sets out the rights and obligations of the shareholders, including voting rights, transfer of shares, and other corporate governance issues which may not be covered by the company charter or bylaws.
7. Disclosure Letter: This document is used by the seller to disclose exceptions to the representations and warranties made in the investment agreement or SPA. This letter helps the seller to avoid any potential violation of the representations and warranties if there are exceptions on the information about the company.

The discussion on the contents of these legal documents is part of the Course Private Equity – Investment Banking for Dealmakers offered by Vietnam Investment Nurturing Hub.