Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Deal Structuring and Documentation in M&A Transactions

Updated 11 October 2026 · Fact-checked

Deal structuring is choosing how a deal is built: share purchase, asset or business purchase, or merger, and how it is paid for. Documentation follows in stages: term sheet or letter of intent, then definitive agreements. Answer exam questions by comparing structures on tax, liabilities, approvals and consideration.

Understand Deal Structuring and Documentation

Every M&A deal starts with two questions. What is the buyer actually buying: the company's shares, or its assets or business? And what will the seller receive: cash, shares, or both? The answers form the deal structure.

Three broad structures are used. In a share acquisition, the buyer takes shares of the target. The target company continues as it is, with all its assets, contracts and liabilities. In an asset or business purchase, the buyer picks specific assets, or an undertaking as a going concern, and usually leaves unwanted liabilities behind. In a merger or amalgamation, a court-sanctioned scheme combines companies by law, and the shareholders of the merging company get consideration under the scheme.

Documentation moves from non-binding to binding. A term sheet or letter of intent (LOI) records the main commercial terms: price range, structure, timeline, exclusivity and confidentiality. Most of it is non-binding, but clauses on confidentiality, exclusivity and costs are usually made binding. After due diligence, the parties sign definitive agreements: a Share Purchase Agreement (SPA) for shares, or a Business Transfer Agreement (BTA) or Asset Purchase Agreement (APA) for assets. A merger uses a scheme of amalgamation instead.

A definitive agreement normally covers price and payment, conditions precedent, representations and warranties, indemnities, covenants between signing and closing, termination rights, and dispute resolution. Representations and warranties allocate risk. The buyer relies on them and seeks indemnity if they prove false.

Consideration can be cash, shares of the acquirer (share swap), other securities, or a mix. Cash gives the seller certainty. A share swap conserves the buyer's cash and lets sellers share future upside. Payment may also be deferred, held in escrow, or linked to future performance (earn-out). For cross-border mergers, section 234 allows consideration in cash, Depository Receipts, or partly each, with prior RBI approval.

Key rules to remember

Section 234(2) consideration: Foreign company may merge into an Indian company (or vice versa) with prior RBI approval; consideration = cash, Depository Receipts, or part cash and part Depository Receipts; Subject to any other law in force. 'Foreign company' means any company or body corporate incorporated outside India, whether or not it has a place of business in India.
Section 236(1): 90% trigger: Acquirer (or persons acting in concert) holds 90% or more of issued equity share capital → must notify the company of intention to buy the remaining equity shares; Applies whether the 90% arises by amalgamation, share exchange, conversion of securities or any other reason.
Section 236(2) and (4): price and deposit: Price = registered valuer's valuation as per prescribed rules; majority deposits the value of shares in a separate bank account operated by the company whose shares are transferred, for at least one year; disbursement within 60 days; Disbursement continues for one year for those not paid or who fail to claim within 60 days.
Section 236(8): sharing of higher price: Minority holders of 75% or more negotiate a higher price for a transfer without disclosing it → majority shares the additional compensation pro rata; Applies where shares were acquired under section 236 and the negotiation happened on or before the date of transfer.
Section 117: filing resolutions: Copy of special resolution (and other listed resolutions or agreements) to be filed with Registrar within 30 days of passing or making; Relevant when the deal needs a special resolution, such as alteration of articles in the deal.

How to solve Deal Structuring and Documentation questions

Use this sequence for any question on structuring or documenting a deal. It keeps the answer in the provision, analysis, conclusion pattern.

1Identify what the buyer wants: control of the whole company, a business line, or specific assets. State this in one line.
2List the structure options that fit: share purchase, business or asset purchase, or merger by scheme.
3Compare them on the points the facts raise: liabilities taken over, tax, approvals needed, time, and stamp duty.
4Choose the structure and justify it with facts from the question, such as hidden liabilities or a need for full control.
5Decide the consideration: cash, share swap, deferred or earn-out, or mixed, and say why it suits both sides.
6Name the documents in order: term sheet or LOI, due diligence, definitive agreement (SPA, APA or scheme), and closing documents.
7State key clauses to be drafted: conditions precedent, warranties, indemnity, escrow, non-compete, termination.
8Apply any statute the facts trigger, such as section 236 for a 90% holder or section 234 for a foreign company, and give a clear conclusion.

Quickest way: Structure, Paper, Pay

When to use it: When time is short and the question asks you to advise on a deal or explain documents.

Structure: write shares vs assets vs merger in one line each, with the main trade-off.
Paper: list term sheet or LOI, then definitive agreement, with binding and non-binding parts.
Pay: name the consideration method and one risk protection (escrow, indemnity, earn-out).
Close with one sentence applying the relevant section to the facts.

Common mistakes in Deal Structuring and Documentation

Saying a term sheet or LOI is wholly binding, or wholly non-binding.
Students memorise one line from notes and ignore that parts differ.
Fix: Write that commercial terms are generally non-binding, while confidentiality, exclusivity and cost clauses are usually expressly made binding.
Treating share purchase and asset purchase as the same in effect.
Both transfer ownership, so the difference in liabilities is missed.
Fix: State that a share purchase brings the target's liabilities along, while an asset or business purchase lets the buyer choose assets and leave liabilities.
Writing the 90% rule of section 236 as a 'right' of the minority only.
Students recall the squeeze-out idea but skip sub-section (3).
Fix: Say the 90% holder must notify the company and offer to buy; minority holders may also offer their shares to the majority at the prescribed price.
Giving the price under section 236 as any negotiated amount.
Confusion with ordinary private deals.
Fix: State that the price is based on valuation by a registered valuer under the prescribed rules.
Listing documents without sequence or purpose.
Answers become lists of names.
Fix: Show the order: term sheet or LOI, due diligence, definitive agreement, closing, and give one line on what each does.
Forgetting RBI approval in a cross-border merger answer.
Students focus on the Companies Act and overlook other law.
Fix: Quote section 234(2): prior RBI approval, with consideration in cash, Depository Receipts, or both.

Worked examples

Example 1

Alpha Pharma Ltd wants to buy the formulations plant of Beta Chemicals Pvt Ltd. Beta has pending tax disputes and an environmental claim on its other units. Advise on the deal structure and the documents.

Show the solution

Alpha wants only the formulations plant, not the whole company.
Options: buy Beta's shares, or buy the plant as a business or asset purchase.
A share purchase brings the tax disputes and environmental claim into Alpha's ownership of Beta. This is the key risk in the facts.
A business or asset purchase lets Alpha take the plant and leave the liabilities with Beta, though it needs asset-wise transfers and may attract more stamp duty.
Recommended: business purchase under a Business Transfer Agreement.
Documents: term sheet or LOI with confidentiality and exclusivity binding; due diligence; then BTA with conditions precedent, warranties, indemnity and possibly an escrow.
Consideration: cash on closing, with part held in escrow against undisclosed liabilities.

Answer: Alpha should structure the deal as a business purchase of the plant through a BTA, preceded by a term sheet or LOI and due diligence, so that Beta's tax and environmental liabilities stay behind. Protect Alpha with warranties, indemnity and an escrow.

Example 2

Rao Infra Ltd acquires shares and now holds 92% of the equity of Sai Builders Ltd. State the obligations that follow under section 236 of the Companies Act, 2013.

Show the solution

Provision: section 236(1) applies when an acquirer holds 90% or more of the issued equity share capital. 92% meets the test.
Rao Infra must notify Sai Builders of its intention to buy the remaining equity shares.
Under section 236(2), it must offer to buy the minority shares at a price based on valuation by a registered valuer under the prescribed rules.
Under section 236(3), the minority may also offer their shares to Rao Infra at that price.
Under section 236(4), Rao Infra must deposit the value of the shares in a separate bank account operated by the company whose shares are transferred, for at least one year; payment to entitled holders is within 60 days, with disbursement continuing for one year for the rest.
Under section 236(8), if holders of 75% or more of the minority negotiate a higher price for a transfer without disclosing it, Rao Infra shares the extra compensation pro rata with the minority.

Answer: Rao Infra must notify the company, offer to buy the 8% minority at a registered-valuer price, deposit the amount in a separate account for at least one year and pay within 60 days, and observe the pro rata sharing rule in section 236(8).

Exam tips

Write structure comparisons as short pairs: share purchase vs asset purchase, with liabilities, tax and approvals as the points.
Always say which term sheet clauses are binding; examiners look for this nuance.
When the facts mention 90%, foreign company or special resolution, quote section 236, 234 or 117 with its exact condition.
Add practical drafting points: conditions precedent, warranties, indemnity, escrow, non-compete and termination.
End with a clear recommendation tied to the facts, not a general discussion.

Practice questions from Process of M&A Transactions

Deal Structuring and Documentation: frequently asked questions

What is the difference between a term sheet and a letter of intent?

Both record the main commercial terms before detailed documents are drawn up. A term sheet is usually a short list of terms. An LOI is often a letter from the buyer. In both, most terms are non-binding, but confidentiality and exclusivity are usually binding.

What is the difference between an SPA and an APA?

A Share Purchase Agreement transfers shares of the target, so the company and its liabilities stay intact. An Asset or Business Purchase Agreement transfers chosen assets or a business, so the buyer can leave out unwanted liabilities.

What consideration methods are used in M&A?

Common methods are cash, a share swap, other securities, or a mix. Payment can be deferred, held in escrow or tied to performance through an earn-out. In a cross-border merger, section 234(2) allows cash, Depository Receipts or both.

How is the price fixed under section 236?

The price is determined on the basis of valuation by a registered valuer in accordance with the prescribed rules. The majority must deposit the value of the shares in a separate bank account for at least one year.