With international mergers-and-acquisitions and joint-venture activity poised to increase in 2011, particularly in emerging markets, executives likely will ask in-house counsel to draft more early-on documents (EODs) for cross-border transactions. Parties commonly use EODs, which may include letters of intent, memoranda of understanding or term sheets, to memorialize their initial understandings of the business terms of a proposed transaction and to serve as the basis for drafting and negotiating definitive agreements. While some attorneys avoid EODs, fearing they invite litigation, they can provide in-house attorneys with helpful tools to assist their clients.
EODs are particularly useful and common in cross-border transactions, because they help establish basic terms and clear initial communications that transcend language and cultural differences. Further, EODs provide a useful framework for negotiating cross-border transactions, which take longer to structure and close than their single-country counterparts. Cross-border deals require lawyers to analyze complex multi-jurisdictional issues, such as tax and foreign investment considerations, and they pose the added challenges involved in conducting due diligence in foreign jurisdictions.
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