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Startup M&A

What is Acqui-hiring?

It's a deal where a company acquires a startup primarily to recruit its talented team rather than for its product or revenue.

What happens to ESOPs during a sale?

Typically, an M&A transaction triggers "Accelerated Vesting," allowing employees to exercise and sell their options/shares as part of the deal.

What is a Holdback?

It is a portion of the purchase price held back by the buyer (e.g., in escrow) to secure indemnification obligations for potential breaches of warranties.

Do all shareholders need to agree to the sale?

If Drag-along rights exist in the Shareholders' Agreement, majority shareholders can force minority shareholders to sell their shares on the same terms.

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Startup M&A (Mergers and Acquisitions) differs radically from traditional company buying and selling. The primary value of startups often lies not in tangible assets (buildings, machinery) but in intellectual property, technology, and the team. Therefore, a startup exit or acquisition requires a specific legal approach focusing on Acqui-hiring, Earn-out mechanisms, and clean IP rights. With the development of the startup ecosystem in Georgia, instances of foreign companies acquiring Georgian startups or local mergers are frequent. Mistakes in this process can lead to deal failure or unfavorable terms for founders (e.g., excessively long Lock-up periods). Specialists on Legal.ge help you manage this dynamic process to maximize your exit value.

What Does Startup M&A Service Cover?

Our lawyers offer services tailored to the needs of high-tech and fast-growing companies:

  • IP Due Diligence: Deep investigation of the legal status of code, trademarks, and patents. It is critical for the buyer to confirm that IP truly belongs to the company and not freelancer developers.
  • Team Retention Schemes: Designing motivation packages (Vesting, Bonus schemes) for key employees and founders to ensure they stay with the company post-deal.
  • Earn-out Mechanisms: Developing contract terms where part of the purchase price depends on the company's future financial results.
  • Tax Structuring: Planning the transaction so that founders and investors receive maximum benefit (e.g., Share Swap).
  • Investor Rights Management: Obtaining consents from existing investors (Angels, VCs) and considering Liquidation Preferences during fund distribution.

Real-World Scenarios When You Need This Service

Startup M&A service is essential for:

  • Strategic Investor Entry: A large corporation buys a startup for technology integration. Legal assurance of tech transfer and integration is needed.
  • Acqui-hiring: The buyer is interested only in the developer team. The transaction must be structured to minimize tax and legal burdens from the old entity.
  • Competitor Acquisition: Buying a competitor startup to increase market share. Antitrust regulations must be considered.
  • Founder Exit: When founders want to sell their shares completely and start a new project.

Georgian Legal Framework and Regulations

Startup M&A is regulated by the Law of Georgia on Entrepreneurs and the Civil Code. Special attention is paid to intellectual property legislation (copyright, patents). Additionally, if the startup has "Virtual Zone Person" or "International Company" status, the consequences of maintaining or cancelling this status under the Tax Code must be considered during the transaction. Transfer of employment relationships is regulated by the Labor Code. An experienced lawyer ensures synchronization of all these components.

Service Process

The Startup M&A process on Legal.ge includes:

  1. Term Sheet Preparation: Agreeing on key commercial terms (Price, Earn-out, Vesting).
  2. Legal Audit: Checking the cleanliness of IP and corporate structure.
  3. Contract Drafting: Preparing the SPA (Share Purchase Agreement), SHA (Shareholders' Agreement), and employment contracts.
  4. Closing: Signing documents and registering changes in the Public Registry.

Why Choose Legal.ge?

Selling a startup is often the most significant transaction in a founder's life. Specialists on Legal.ge understand the specifics of tech business and venture capital dynamics well. We will help you avoid typical mistakes and close the deal on the best terms.

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