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M&A transactions rarely occur in a financial vacuum. Whether the target company is being acquired through an asset or equity purchase, its existing debt structure can introduce a host of legal and logistical challenges that must be carefully addressed. Overlooking these issues can lead to covenant violations, unanticipated costs, or even post-closing legal disputes.

One of the most immediate concerns is the risk of covenant breaches. Most commercial loan agreements contain a range of restrictive covenants that limit the borrower’s ability to sell assets, merge with another company, or incur new debt without the lender’s prior consent. An M&A transaction, especially one that involves a change of control or significant restructuring, can easily trigger these restrictions. Violating a covenant can result in an event of default, acceleration of the debt, or a requirement to repay the loan in full. As such, early review of credit agreements and open communication with lenders are essential.

Another common issue is prepayment penalties. If existing debt must be retired as part of the transaction, the borrower may be required to pay fees or premiums for early repayment. These penalties, often buried in the fine print of loan agreements or bond indentures, can materially impact the economics of a deal. Buyers and sellers must factor these costs into their financial modeling and, where appropriate, negotiate with lenders to reduce or waive them.

For companies with layered or syndicated financing, intercreditor consents add another level of complexity. Intercreditor agreements often give certain classes of creditors—typically senior lenders—rights to approve or block changes to the capital structure, asset sales, or collateral arrangements. Coordinating these consents across multiple stakeholders can be time-consuming and politically sensitive, particularly if some creditors view the transaction as unfavorable.

Finally, asset-based loans and secured financing arrangements often involve security interests in the target’s property, equipment, accounts receivable, or intellectual property. As part of the M&A process, these security interests must be released, a legal process that may involve obtaining lien releases, UCC-3 termination statements, or other documentation. Once the buyer acquires the assets or equity, it must re-perfect the security interests in its own name if post-closing financing is involved. This requires careful coordination with legal counsel, lenders, and filing offices to avoid gaps in collateral coverage.

In short, the intersection of M&A and existing debt obligations is a complex but critical area of legal diligence. A proactive approach—one that involves identifying all outstanding debt instruments, understanding their restrictions, engaging with lenders early, and planning for refinancing or consent logistics—can help avoid costly disruptions and ensure that financing doesn’t become a roadblock to a successful closing.

M&A Deals: Here’s What You Need to Know
How Commercial Contracts Can Make or Break Your M&A Deal
What Really Keeps M&A Deals on Track? A Closer Look at Governance and Fiduciary Duties
Consents and Approvals: The First Gate to Closing an M&A Transaction

For guidance, contact Vincent Costa at vcosta@cmmllp.com or 631-738-9100.

While external factors such as regulatory approvals and contract consents often dominate M&A discussions, a range of internal corporate governance and fiduciary obligations can be equally critical, and equally capable of derailing a transaction. The governing documents, shareholder rights, and board responsibilities within the buyer and seller entities create a legal framework that must be carefully navigated to ensure the deal is valid, enforceable, and free of post-closing disputes.

At the heart of this framework are the fiduciary duties owed by directors and officers, particularly those of the selling company. In sale scenarios, these fiduciary duties—primarily the duties of care and loyalty, require directors to act in the best interests of the company and its shareholders. For public companies, this includes conducting a robust sale process, evaluating offers fairly, and avoiding conflicts of interest. Any perceived failure to uphold these duties may expose board members to litigation, often in the form of shareholder derivative suits or class actions. In private companies, while the scrutiny may be lower, legal risk still exists, particularly when controlling shareholders or insiders stand to benefit from the transaction.

Another key governance issue involves appraisal and dissenters’ rights, which are typically granted to minority shareholders under corporate law statutes in many jurisdictions. These rights allow dissenting shareholders to oppose the deal and demand a judicial determination of the “fair value” of their shares, which could exceed the agreed-upon purchase price. While relatively rare in amicable transactions, these claims can introduce legal complexity, delay post-closing integration, and create contingent liabilities for the buyer.

The deal process may also be constrained by charter and bylaw provisions that create procedural or structural barriers to a transaction. These include anti-takeover mechanisms such as poison pills, which dilute share value upon a triggering event, or staggered boards, which prevent full board turnover in a single election cycle. Although these provisions are often intended to protect companies from hostile takeovers, they can also slow down or block friendly transactions if not addressed early. Even seemingly benign requirements—such as supermajority voting thresholds or notice periods—can complicate timelines and introduce legal risk if improperly followed.

To navigate these challenges, buyers and sellers must conduct thorough reviews of their respective governance frameworks early in the deal process. This includes analyzing corporate charters, bylaws, shareholder agreements, and board policies to identify and mitigate potential roadblocks. In many cases, advance planning—such as securing board resolutions, amending governing documents, or negotiating waivers—can neutralize these internal obstacles and ensure compliance with fiduciary and legal obligations. Proper governance not only protects the transaction from challenge but also reinforces the legitimacy and transparency of the overall deal process.

M&A Deals: Here’s What You Need to Know
How Commercial Contracts Can Make or Break Your M&A Deal
Consents and Approvals: The First Gate to Closing an M&A Transaction
The Overlooked Obstacle in M&A: Existing Debt and Its Hidden Risks

For guidance, contact Vincent Costa at vcosta@cmmllp.com or 631-738-9100.

July and August are filled with many significant events in legal history. In 1776, the Declaration of Independence was adopted by the Continental Congress; in 1868 the 14^th Amendment to the Constitution, focusing on State actions, was ratified; August 1776, is when most members of the Continental Congress signed the Declaration of Independence; President Johnson signed the Voting Rights Act on August 6, 1965; Thurgood Marshall was confirmed as a Justice of the Supreme Court on August 30, 1967, and, on August 8, 1974, President Nixon announced his resignation on national television.  All these events are significant and worthy of their own discussion, but I want to focus this month on the Declaration of Independence. 

But let’s start on July 2. 1776.  John Adams stated, in a July 3, 1776, letter to his wife Abigal, that “[t]he Second Day of July 1776, will be the most memorable Epocha, in the History of America.  I am apt to believe that it will be celebrated, by succeeding Generations, as the great anniversary Festival.  It ought to be commemorated, as the Day of Deliverance by solemn Acts of Devotion to God Almighty.  It ought to be solemnized with pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires, and Illuminations from one End of this Continent to the other from this Time forward forever more.”[i]   What event triggered such strong feelings?  It was the adoption, on July 2, 1776, of the Lee Resolution by the Continental Congress.

The Lee Resolution was proposed on June 7, 1776, by Ridhard Henry Lee of Virginia.  The Lee Resolution stated: “Resolved, That these United Colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved.  That it is expedient forthwith to take the most effectual measures for forming foreign Alliances.  That a plan of confederation be prepared and transmitted to the respective Colonies for their consideration and approbation.” [ii] A few days after proposal of the Lee Resolution, a committee was appointed to draft a declaration of independence.

The Lee Resolution was approved on July 2, 1776, by a vote of 12-0 with the New York delegation abstaining.  Then, on July 4, 1776, the Continental Congress approved the Declaration of Independence.

The Declaration of Independence, in my view, is not “A declaration of unity and love and respect . . .”  I read it as just the opposite.  The opening paragraph specifically states that the document was a declaration of “the causes which impel them [the People] to the Separation.”  The second paragraph (“We hold these truths to be self evident . . .”) explains that the decision to declare independence was not a knee jerk reaction to some isolated event, but rather the declaration resulted from “a History of repeated Injuries and Usurpations, all having in direct Object the Establishment of an absolute Tyranny over these States.”    One of my favorite lines appears in this paragraph-“But when a long Train of Abuses and Usurpations, pursuing invariably the same Object, evinces a Design to reduce then under absolute Despotism, it is their (the People) Right, it is their Duty, to throw off such Government, and to provide new Guards for their future Security.”  The Declaration continues with a long list of specific “Abuses” and “Usurpations”  justifying the Declaration.  Then, the Declaration explains that every “Petition for Redress” was rebuffed and “answered only by repeated Injury” and only as a last resort, when every other avenue failed, was “Separation” necessary.

After adopting the Declaration of Independence, the Continental Congress then directed that the Declaration be engrossed on parchment and on August 2, 1776, John Hancock signed, followed by other delegates.  Interestingly, Robert R. Livingston of New York, and a member of the 5-person committee charged with drafting the Declaration, did not sign[iii] and Richard Stockton of New Jersey “recanted” his signature when, having been captured by the British and held under harsh conditions, he took an oath of obedience to the King.[iv]

The Declaration of Independence contains a mere 1,337 words (including the title) and can be read in about six minutes.  I encourage everyone to take the six minutes to read the Declaration; it is as relevant today as it was 249 years ago and it has helped my understanding of our country and the Constitution.

For anyone interested in gaining a better understanding of the Declaration of Independence and its relationship to the Constitution, I highly recommend “We Hold These Truths” by Mortimer J. Adler.

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[i] https://www.masshist.org/digitaladams/archive/doc?id=L17760703jasecond

[ii] https://www.archives.gov/milestone-documents/lee-resolution

[iii] https://www.constitutionfacts.com/us-declaration-of-independence/fascinating-facts/?srsltid=AfmBOor9ZsEV-Zvew4we_1Ven4lpiPnUbzbIkpOKlUZ1P0YXjx2ytwrH

[iv] https://www.americanheritage.com/signer-who-recanted