If you are curious about, or heading into, corporate or M&A work, understanding how a deal actually progresses from start to finish is genuinely useful. It demystifies the process and helps you see where lawyers add value at each stage. Let me walk you through, in general terms, how an M&A deal typically progresses from term sheet to closing, and what corporate lawyers do along the way.
Quick answer
An M&A (mergers and acquisitions) deal typically progresses through a series of stages from term sheet to closing. In general terms, the common stages are: the term sheet stage, where the parties set out the key commercial terms and outline of the proposed deal, often in a term sheet or similar preliminary document; due diligence, where the buyer’s side investigates the target, legally and otherwise, to understand what is being acquired and identify risks and issues; negotiating and drafting the definitive agreements, where the detailed, binding deal documents, such as the main acquisition agreement and related documents, are negotiated and drafted, reflecting the deal terms, findings from diligence, and the parties’ respective protections; signing, where the parties execute the definitive agreements; the period between signing and closing, where, in many deals, conditions to closing are satisfied and steps completed before the deal completes; and closing, where the deal completes, closing steps are carried out, and the transaction takes effect.
Throughout, corporate lawyers play central roles, advising, conducting and managing diligence, negotiating and drafting documents, working through conditions and closing steps, and coordinating the process. The exact stages, sequence and specifics vary from deal to deal, so this is a general picture.
The keys are to understand the typical progression, term sheet, diligence, negotiating and drafting definitive agreements, signing, the signing-to-closing period, and closing, and the central roles lawyers play at each stage. General overview; specifics vary by deal; no figures or timelines.
Stage 1: The term sheet stage
Early on, the parties typically set out the key commercial terms and outline of the proposed deal, often in a term sheet or similar preliminary document. This captures the main terms and shape of the deal at a high level, providing a framework the parties can then work from. Lawyers often help advise on and prepare these preliminary documents.
Stage 2: Due diligence
Next, the buyer’s side typically conducts due diligence, investigating the target, legally and otherwise, to understand what is being acquired and to identify risks, issues and things that matter to the deal. Legal due diligence is a core lawyer-led part of this. The findings inform the deal, the documents and the negotiations.
Stage 3: Negotiating and drafting the definitive agreements
The parties then negotiate and draft the definitive, binding deal documents, such as the main acquisition agreement and related documents. These detailed documents reflect the deal terms, the findings from diligence, and the parties’ respective protections, such as the allocation of risk and the promises each side makes.
This negotiating and drafting is central lawyer work, careful, detailed and important.
Stage 4: Signing
Once the definitive agreements are agreed, the parties execute, or sign, them. Signing marks the point where the parties are committed to the agreed deal on its terms.
In some deals, signing and closing happen together. In others, there is a gap between them, as discussed in the next stage. Lawyers manage the signing process and documents.
Stage 5: Between signing and closing
In many deals, there is a period between signing and closing during which certain conditions to closing are satisfied and steps are completed before the deal can complete. This is where conditions, the things that must be met for the deal to close, are worked through.
Lawyers play a key role in managing conditions and the steps toward closing.
Stage 6: Closing
Finally, at closing, the deal completes, the closing steps are carried out, and the transaction takes effect. Closing is the culmination of the process, where the deal is brought to completion. Lawyers are heavily involved in managing and executing the closing steps.
YLCC ACTION STEP: Learn the typical M&A progression: term sheet, key terms and outline; due diligence, investigating the target and identifying risks; negotiating and drafting the definitive agreements, the detailed binding documents; signing, executing them; the period between signing and closing, satisfying conditions and completing steps; and closing, completing the deal. Understand the central roles lawyers play at each stage, advising, running diligence, negotiating and drafting, managing conditions and closing. Remember this is a general picture; the exact stages and specifics vary from deal to deal.
If this is you
If you are heading into corporate or M&A work: understanding this progression helps you see where you fit and add value at each stage. Study the different stages and understand how the work connects from one to the next.
If you are curious about M&A: this general walkthrough demystifies the process, from term sheet through diligence, documents, signing and closing. It gives you a framework for understanding the work.
If you want to understand a specific stage: focus on the relevant part of the process, whether due diligence, definitive agreements, conditions to closing, or deal closings. Remember that specifics vary by deal.
FAQs
- How does an M&A deal progress from term sheet to closing? Typically through stages: term sheet, key terms and outline; due diligence, investigating the target; negotiating and drafting the definitive agreements; signing; the period between signing and closing, satisfying conditions; and closing, completing the deal.
- What’s a term sheet? A preliminary document, or similar document, setting out the key commercial terms and outline of the proposed deal and providing a framework to work from.
- What happens in due diligence? The buyer’s side investigates the target, legally and otherwise, to understand what is being acquired and identify risks and issues, with the findings informing the deal and documents.
- What’s the difference between signing and closing? Signing is executing the definitive agreements; closing is when the deal completes and takes effect. In some deals they happen together; in others there is a gap during which conditions are satisfied.
- Do all deals follow the same stages? No. The exact stages, sequence and specifics vary from deal to deal. This is a general picture.
