M&A Transaction: Who Does What from LOI to Closing.
Who does what from LOI to closing? Roles, workstreams and interfaces between lawyers, M&A advisers, tax advisers, auditors and the parties.
Anyone buying or selling a business for the first time tends to underestimate how many people are involved. On both sides of the table, buyers and sellers are joined by lawyers, M&A advisers, tax advisers and auditors – and often also environmental consultants, insurance advisers or sector specialists. What may look like an inflated apparatus at first glance has a simple reason: each of these advisers covers a separate workstream, and the different workstreams intersect at decisive points. If you do not understand the roles, you quickly lose track of the transaction – or worse, you notice only after closing that a workstream was never properly set up in the first place.
This article explains the typical roles and workstreams in an M&A transaction from the perspective of German SME practice, places them in their usual sequence and shows where the interfaces lie.
Role Matrix: Who Does What?
Not every SME transaction needs every workstream as a separate team. What matters is that each function is deliberately covered and that the interfaces are clear.
| Role | Core contribution | Typical timing |
|---|---|---|
| Legal advisers | Structure, legal due diligence, SPA, closing documentation | NDA/LOI through post-closing |
| M&A advisers | Process management, buyer approach, commercial terms, equity bridge | Preparation through signing/closing |
| Tax advisers | Tax structure, tax due diligence, tax indemnities, tax provisions in the SPA | ideally before LOI through closing |
| Auditors / FDD | Quality of earnings, net debt, working capital, purchase price mechanism | Due diligence and SPA schedules |
| Financing advisers / banks | Acquisition financing, debt capacity, debt documents, funds flow | Offer structure through closing |
| Specialists | Commercial, IT/cyber, ESG/environmental, insurance or pensions due diligence | Depending on the target’s risk profile |
| Notary | Notarisation, register implementation, shareholders’ list | Final drafting and closing |
| W&I advisers / insurer | Insurability of the warranty package and underwriting | Advanced due diligence through signing |
| Parties | Data room, operational assessment, deal decisions, integration | throughout |
Overview of the adviser landscape
Legal advisers
The lawyers on both sides are typically the advisers with the broadest remit in a transaction, because most threads ultimately have to come together in the share purchase agreement (SPA). They support the deal from the confidentiality agreement (non-disclosure agreement, NDA) to the last post-closing obligation. Their core tasks are:
- Transaction structure: Together with the tax advisers, they clarify whether a share deal or asset deal is the right structure, whether a reorganisation should take place beforehand and which corporate steps are required.
- Legal due diligence: Review of the legal position of the target – corporate law, contracts, employment law, intellectual property, regulatory matters, real estate and litigation. On the buyer side, the result typically feeds into a due diligence report; on the seller side, more often into a legal fact book. Both form the basis for risk allocation in the purchase agreement.
- Contract negotiation and drafting: The share purchase agreement (SPA) is the central document. In addition, there may be term sheets, letters of intent, shareholders’ agreements, managing director service agreements, escrow agreements and numerous ancillary documents.
- Merger control and regulatory approvals: Review of whether a filing with the German Federal Cartel Office (Bundeskartellamt) or the European Commission is required, and support throughout the process.
- Closing coordination: The legal side typically coordinates implementation – signing, notarisation, commercial register filings and satisfaction of conditions precedent.
M&A advisers (corporate finance / investment bank)
The M&A adviser – depending on deal size, either a corporate finance adviser or an investment bank – is in many transactions the commercial pace-setter. It is often the first adviser to be engaged and manages the process as the link between the parties from preparation to closing.
On the seller side (sell-side adviser), it typically prepares the information memorandum, identifies and approaches potential buyers, manages the sale process as a whole and leads the commercial negotiations. In a bilateral deal, the process is leaner, but the role remains the same: the M&A adviser makes sure that the transaction gets underway, stays on track and achieves the highest possible purchase price for the seller.
On the buyer side (buy-side adviser), the focus is on valuing the target, structuring the offer and negotiating the key commercial terms.
In German SME practice, the M&A adviser often also covers substantial parts of the commercial workstream that, in larger transactions, are handled by separate auditors or transaction advisers: the indicative valuation, construction of the equity bridge, the purchase price mechanism on a commercial level and alignment of the commercial parameters with legal counsel. Our equity bridge calculator helps make that purchase-price logic tangible in actual numbers. Financial due diligence in the narrower sense – as an independent review exercise – usually remains with the auditor; depending on the mandate, however, it may also sit with the M&A adviser.
Tax advisers
Tax advisers are involved on both sides, but their focus differs.
Seller side: optimisation of the taxation of the sale. Whether the seller is a natural person, a holding company or a fund has a major impact on the tax consequences. Preparatory reorganisations – such as contributing shares into a holding company – may need to take place months or even years before the transaction.
Buyer side: tax due diligence (review of the target’s tax risks) and structuring of the acquisition financing. Whether the purchase price is financed through acquisition debt is primarily a financing question; from a tax perspective, the relevant issue is whether and in what structure the interest expense can be deducted. Before that, however, the parties must determine whether a share deal or asset deal is more tax-efficient. If an asset deal is chosen, the next question is how the purchase price allocation (PPA) should be structured for tax purposes.
Regardless of side, tax advisers also regularly work on the tax provisions of the SPA, in particular tax indemnity clauses and the delineation of tax-related indemnities.
Caution: The interests of buyer and seller can be tax-wise diametrically opposed. What is tax-efficient for the seller (share deal, holding structure) may be disadvantageous for the buyer (no step-up, no interest deduction). The transaction structure is therefore always a compromise that can only be found by both tax teams and the legal advisers working together.
Auditors and transaction advisers (financial)
Where the M&A adviser does not cover the commercial workstream itself, auditors or specialised transaction advisers come in.
Financial due diligence (FDD): FDD is the central financial review on the buyer side. The focus is on earnings quality (quality of earnings), balance sheet quality, working capital, net debt and cashflow generation. It provides the basis for the purchase price negotiation and the definition of the equity bridge components.
Business valuation: If not already prepared by the M&A adviser or by the parties themselves, auditors produce an indicative or expert valuation – often based on a discounted cash flow method or on multiples.
Financing and banks
On the buyer side, debt-financed transactions add a separate financing workstream. It is often underestimated because it initially looks like a purely commercial topic. In practice, however, financing can affect the LOI already: how much debt can the business support? How much equity is required? Are there lender conditions that need to be reflected as closing conditions in the SPA?
Depending on the deal, this workstream involves banks, debt advisers, financing counsel and the financial due diligence team. By the time the SPA is negotiated, the purchase price mechanism, funding conditions, security package, financing documentation and funds flow must fit together. Otherwise a deal may be ready to sign legally, but not executable economically.
Specialists and focused due diligence
Depending on the target, further specialists may join alongside legal, tax and financial advisers. Typical examples include commercial due diligence advisers for market, customer and competitive position, IT and cyber advisers for systems and security risks, environmental consultants for real estate or manufacturing businesses, insurance specialists for coverage gaps and pensions or HR advisers for pension liabilities and larger workforces.
These roles are not visible as separate teams in every SME transaction. What matters is that the function is deliberately covered. A software company without an IT/cyber review, a manufacturing business without environmental and health-and-safety input, or a carve-out without operational separation planning can create blind spots that legal due diligence alone will not close.
Notary
For transfers of shares in a GmbH, notarisation of the purchase agreement is mandatory (§ 15 para. 3, 4 GmbHG). The notary is not a party representative, but a neutral public office holder. That said, the notary’s tasks go well beyond merely notarising documents:
- Review of the legal structure: The notary reviews the SPA for formal validity, points out formal defects and obvious omissions. The notary must ascertain the parties’ intentions and record the facts clearly; however, this does not replace or duplicate the in-depth substantive review carried out by party counsel.
- Commercial register and shareholders’ list: Amendments to the articles of association and appointments of managing directors that coincide with closing are filed by the notary with the commercial register. In the case of a change of shareholders in a GmbH, the notary usually also files the updated shareholders’ list with the commercial register.
- Implementation management: In complex transactions, the notary occasionally also manages closing on a fiduciary basis, for example as escrow agent or as administrator of a trustee account for the purchase price, or through staged filings tied to the occurrence of closing conditions.
Where shares in a stock corporation are acquired, there is no notarisation requirement. Even then, the notary can still play a role, for example in upstream reorganisations (merger, change of legal form), capital measures or where the articles of association need to be amended. In the case of a GmbH & Co. KG, the commercial register filing at the level of the KG is an important implementation step after the transfer of interests; at the level of the general partner GmbH, there is often a separate – usually leaner – purchase agreement governing the acquisition of the general partner shares.
Tip: Alignment of the SPA draft with the notary should not be left to the last minute. Notaries who regularly work on M&A transactions have their own practical experience with drafting and implementation questions that can be helpful in the negotiation process.
W&I insurance (warranty & indemnity insurance)
Where W&I insurance is envisaged, this often adds another advisory workstream. It is typically used where the seller wants to limit its liability as far as possible or the buyer seeks insured warranty coverage. In terms of timing, the broker and insurer usually become involved once due diligence is already advanced and in parallel with the SPA negotiation. In addition to the parties and their legal advisers, this generally brings in a specialised W&I broker, the insurer with its underwriting team and, depending on the deal, tax and financial advisers as well. The reason is simple: the insurer reviews not only the warranty package, but also the quality of the due diligence, the disclosure in the data room and the liability regime set out in the SPA.
Due diligence in detail
Due diligence is not a single workstream. It consists of several parallel reviews carried out by different advisers. Not every workstream is relevant in every transaction.
Legal due diligence: Review of the legal position of the target by the buyer’s legal advisers. Typical review areas are corporate law (articles of association, shareholder structure, resolutions), key contracts (customers, suppliers, leases), employment law (service agreements, works agreements, transfer of business), intellectual property, data protection, regulatory permits and pending or threatened litigation. The result feeds directly into the warranty package and the indemnity provisions of the SPA.
Tax due diligence: Review of tax risks by the buyer’s tax advisers. The focus is on ongoing tax audits, tax loss carryforwards and their usability after the acquisition, transfer pricing in intra-group transactions, VAT risks and the tax treatment of shareholder loans, for example with regard to interest, subordination or potential hidden contributions. In the SPA, tax risks are often dealt with through specific indemnity claims (tax indemnities).
Financial due diligence (FDD): The financial review already described above. It provides the basis for the purchase price mechanism and the definition of the equity bridge components.
Commercial due diligence: Review of the business model, market position, customer base and growth prospects. This is often carried out internally by the buyer, by the buyer’s in-house teams or by specialised strategy advisers. It answers the question whether the buyer’s investment thesis is robust.
Additional due diligence workstreams: Depending on the sector and the nature of the transaction, there may also be IT/cyber due diligence, environmental due diligence (environmental liabilities, contamination), insurance due diligence (insurance coverage), compliance due diligence (corruption, sanctions) or pensions due diligence (pension obligations). In German SME practice, these topics are often covered within legal or financial due diligence rather than being set up as separate workstreams.
In the end, all due diligence results must be brought together. That is not something that happens automatically. In practice, the reports are often completed in parallel without the teams systematically checking the cross-connections. A tax risk identified in tax due diligence has to end up as an indemnity in the SPA; a working-capital issue from FDD has to feed into the accounting principles; a legal risk from legal due diligence may have tax consequences. Without coordinated consolidation, risks remain trapped in the reports instead of being addressed in the contract.
The parties themselves
The parties’ own role is often underestimated. Buyers and sellers do more than instruct advisers; they make the strategic decisions without which no transaction moves forward:
- Seller: determination of the sale perimeter (full sale, partial sale, carve-out), definition of the commercial parameters (price expectations, deal breakers, willingness to give warranties), preparation of the data room and participation in management presentations.
- Buyer: strategic investment thesis, valuation framework, financing structure and integration strategy. In due diligence, the buyer often brings operational expertise that no external adviser can replace – for example in assessing customers, products, technology or management quality.
The timeline: phases and workstreams
A transaction does not proceed in a straight line, but it usually follows a typical pattern of phases. The overview below shows the allocation of roles in a bilateral one-on-one process between one buyer and one seller – not in an auction process, where individual workstreams are timed differently.
The diagram intentionally groups specialist topics. “Specialists” does not mean a fixed team; it covers commercial, IT/cyber, ESG/environmental, insurance, pensions or other focused reviews where relevant for the specific deal. “Financing” covers banks, debt advisers and financing counsel; in an all-equity transaction this workstream may fall away.
Transaction map
Who does what in the deal?
Bilateral process (one buyer, one seller)
NDA · LOI · Vendor DD
Exit tax · Reorganisation
Data room · Scope
Teaser · IM · Buyer outreach
Phase 1
Preparation & LOI
Structure
Share / asset · Regulatory · LOI
Screening · Offer
NDA · LOI · Regulatory
Acquisition structure
Financing · Debt capacity
Prelim. valuation
Q&A · Management call
Data room
Documents
Financial pack · Vendor FDD
Process coordination
Phase 2
Due diligence
DD findings
Red flags · Issue list
Legal DD
Tax DD
FDD
Commercial · IT/cyber · ESG
Lender DD
SPA · Markup
Tax clauses
Commercial points
Clean exit · Disclosure
Phase 3
Contract negotiation
Excel → contract
DD → warranties · Accounting principles · Notary review
SPA · Markup
Tax clauses
Equity bridge
Debt docs · CPs
Broker · Policy · Underwriting
Closing · Conditions
Covenants
Phase 4
Signing & closing
Notary / implementation
Notarisation · Commercial register · Funds flow
CPs · Filings
Funds flow · Funding
Integration · TSA
Claims
Disposal gain
Phase 5
Post-closing
Accounts / earn-out
Closing accounts · Earn-out · Claims
Accounts · Review
Accounts · Preparation
Tax filings
PMI · TSA
Phase 1
Preparation & LOI
NDA · LOI · Vendor DD
Exit tax · Reorganisation
Data room · Scope
Teaser · IM · Buyer outreach
Structure
Share / asset · Regulatory · LOI
Screening · Offer
NDA · LOI · Regulatory
Acquisition structure
Financing · Debt capacity
Prelim. valuation
Phase 2
Due diligence
Q&A · Management call
Data room
Documents
Financial pack · Vendor FDD
Process coordination
DD findings
Red flags · Issue list
Legal DD
Tax DD
FDD
Commercial · IT/cyber · ESG
Lender DD
Phase 3
Contract negotiation
SPA · Markup
Tax clauses
Commercial points
Clean exit · Disclosure
Excel → contract
DD → warranties · Accounting principles · Notary review
SPA · Markup
Tax clauses
Equity bridge
Debt docs · CPs
Broker · Policy · Underwriting
Phase 4
Signing & closing
Closing · Conditions
Covenants
Notary / implementation
Notarisation · Commercial register · Funds flow
CPs · Filings
Funds flow · Funding
Integration · TSA
Phase 5
Post-closing
Claims
Disposal gain
Accounts / earn-out
Closing accounts · Earn-out · Claims
Accounts · Review
Accounts · Preparation
Tax filings
PMI · TSA
Where the workstreams intersect
The diagram suggests a neat division of labour. Practice is less tidy. Three interfaces deserve particular attention.
Transaction structure: law meets tax
The choice between share deal and asset deal, the question of a preparatory reorganisation and the financing structure of the acquisition are neither purely tax issues nor purely legal issues. They have to be solved together – and early. Anyone who questions the structure only during contract negotiations risks delays and costly replanning.
Purchase price mechanism: financial meets legal
The equity bridge, the working-capital definition and the accounting principles are typically developed by the commercial advisers in Excel, translated into contractual language by the lawyers and reviewed by the tax advisers for their tax impact. If you want to model that logic before the SPA is drafted, the equity bridge calculator is a useful companion. This is one of the most error-prone handovers in the entire transaction: what works in the Excel logic must also be reflected correctly in the SPA – and vice versa. Mistakes at this interface are among the most common causes of post-closing disputes.
Due diligence: translating findings
The different due diligence workstreams run in parallel, but they are read by different teams. As described above, the results must be brought together so that risks do not remain buried in reports, but are addressed in the contract. In practice, this is the task most likely to suffer under time pressure.
Financing and implementation
Debt-financed acquisitions create an additional interface between the SPA, financing documentation and closing mechanics. Lender conditions must not accidentally conflict with the SPA closing conditions; conversely, the funds flow on the closing date needs to be prepared so that the purchase price, repayment of existing debt, escrow amounts and any shareholder loans are paid in the correct sequence. This interface involves legal, financial, financing parties and often the notary as well.
What this means for clients
Three pragmatic points:
Choose advisers early. Tax structuring and data room preparation begin long before the first LOI. If you involve your advisers only once due diligence starts, you give away room for manoeuvre.
Actively manage interfaces. The parties – or an M&A adviser – must make sure that the workstreams talk to each other. Parallel due diligence without a shared issues list leads to blind spots.
Budget for costs. An SME M&A transaction ties up advisers on both sides for several months. Transaction costs are a relevant item and should be part of the deal economics. Savings made in the wrong place – for example on financial due diligence or on contract negotiations – often have to be paid for later, and at a higher price, after closing.