A Strategic Alliance Agreement documents cooperative arrangements between entities for mutual benefit. This playbook highlights IP ownership, performance metrics, and termination strategies.
Why This Matters: Clear closing conditions ensure that the transaction proceeds only when critical issues are resolved, reducing execution risk. Vague or one-sided conditions may allow the counterparty to walk away or force closure prematurely.
Negotiation strategy
If you're the Buyer:
Ensure that all closing conditions are clearly defined and within your control. Include specific carve-outs for industry-wide changes to protect against unforeseen circumstances.
If you're the Seller:
Negotiate for flexible conditions that allow for adjustments if market conditions change. Ensure that termination rights are balanced and not overly restrictive.
Essential elements
1
Conditions Precedent
Prerequisites for transaction closure.
2
Material Adverse Change
Protects against significant negative impacts.
3
Termination Rights
Allows exit if conditions unmet.
Action framework
ACCEPT
Propose edits when conditions are too vague or not aligned with business goals.
EDIT
Reject if conditions are overly one-sided or impossible to meet.
ADD
Add new language if critical conditions are missing or inadequately addressed.
PRO TIP
Always include a clear definition of material adverse change with necessary carve-outs.
Example clauses
FAVORABLE
Preferred Closing Conditions
"Each Party's obligation to consummate the transactions is subject to the satisfaction or waiver of the following conditions precedent..."
NEUTRAL
Standard Closing Terms
"The Parties agree to proceed with the Closing upon satisfaction of all standard conditions..."
UNFAVORABLE
Unclear Closing Conditions
"The obligation to close is subject to conditions that may be determined at a later date..."
Fallbacks
High-Risk Projects
In high-risk projects, ensure that closing conditions are stringent and include detailed risk assessments to protect against potential losses.
Cross-Border Transactions
For cross-border deals, include conditions related to regulatory approvals and currency fluctuations to mitigate international risks.
Technology Acquisitions
In tech acquisitions, focus on IP rights and integration capabilities as key closing conditions to ensure seamless transition.
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