A merger or acquisition in Israel is usually carried out in one of three ways — a share purchase, an asset purchase, or a statutory merger under the Companies Law — and the structure you choose shapes the tax, the liabilities you inherit, and the approvals you need. Getting the structure and the due diligence right at the start is what protects the deal later.
The three common deal structures
Share purchase
The buyer acquires the shares of the target company, and the company continues to exist with all of its assets, contracts and liabilities intact. This is often the simplest route where the business is healthy and the buyer wants continuity, but it also means the buyer inherits historic liabilities — which is why thorough due diligence and strong representations and warranties matter.
Asset purchase
The buyer acquires specific assets and, where agreed, specific liabilities, leaving the rest behind in the seller's company. This gives the buyer more control over what is and isn't assumed, but it can require consents to assign key contracts, employees, permits and intellectual property.
Statutory merger
Two companies combine into one surviving entity under the merger provisions of the Companies Law, with the required board and shareholder approvals and a defined creditor-notice process. This is common in larger or more structured transactions.
Due diligence: what buyers examine before signing
Legal due diligence is the backbone of any M&A process. It typically covers corporate records and the cap table, material contracts and change-of-control clauses, employment arrangements, intellectual property ownership and registrations, litigation and disputes, regulatory and licensing status, real estate and leases, and tax exposure. The findings feed directly into the price, the warranties, and the indemnities.
The key agreements
- Term sheet / MOU — the headline commercial terms, usually mostly non-binding except for confidentiality and exclusivity.
- Definitive purchase agreement — the binding SPA or APA with representations, warranties, covenants, conditions to closing and indemnification.
- Disclosure schedules — the seller's qualifications to the warranties.
- Ancillary documents — board and shareholder resolutions, assignment and consent letters, escrow arrangements and, where relevant, non-compete and transition undertakings.
Approvals and third-party consents
Depending on the parties and the sector, a transaction may require internal corporate approvals, contractual consents (landlords, lenders, key customers), and, above certain thresholds or in regulated industries, regulatory clearances such as competition (antitrust) approval. Mapping these early prevents surprises close to signing.
Where deals most often run into trouble
The recurring pressure points are unclear or unassigned intellectual property, change-of-control clauses that let key customers walk, undisclosed liabilities that surface after closing, employee and option-plan issues, and price-adjustment or earn-out mechanisms that are drafted loosely and end in a dispute. Each of these is manageable when it is identified during due diligence rather than after closing.
Related guides: Legal Due Diligence in Israel | Cross-Border M&A in Israel | Investing in an Israeli Company
Planning to buy or sell a business in Israel? Moshe Kahn Advocates guides buyers and sellers through structure, due diligence and negotiation. Contact us for a focused consultation.
Frequently asked questions
What is the difference between a merger and an acquisition?
An acquisition is one party buying another's shares or assets; a merger is two companies combining into a single surviving entity. In practice the terms are often used together because many deals blend elements of both.
Should I structure my deal as a share purchase or an asset purchase?
It depends on your goals. A share purchase gives continuity but inherits historic liabilities; an asset purchase lets you pick what you assume but may require consents to transfer contracts, employees and permits. Tax treatment often drives the decision, so it should be reviewed with legal and tax advisors together.
How long does an M&A transaction take in Israel?
It varies widely with the size and complexity of the deal, the depth of due diligence, and whether regulatory approvals are needed. There is no fixed timetable.
What is legal due diligence and why does it matter?
It is a structured review of the target's legal affairs — corporate, contracts, IP, employment, litigation, regulatory and tax. It reveals risks that affect the price and the protections you need in the agreement.
What are representations and warranties?
Statements the seller makes about the business. If they turn out to be untrue, they give the buyer a contractual remedy, usually through indemnification.
What is an earn-out?
A mechanism where part of the price is paid later, contingent on the business hitting agreed targets after closing. Vague targets are a common source of post-closing disputes.
Do I need regulatory approval to complete a deal in Israel?
Sometimes. Competition (antitrust) approval can be required above certain thresholds, and specific sectors have their own regulators. It should be checked early.
What happens to employees in an acquisition?
In a share purchase, employment generally continues with the same employer; in an asset purchase, employee transfer must be handled expressly and in line with labor law.
Can a key contract block my transaction?
Yes. Many contracts contain change-of-control or anti-assignment clauses that require the counterparty's consent, which is why they are identified during due diligence.
What is an escrow in an M&A deal?
An arrangement where part of the price is held by a third party after closing, to secure the seller's indemnification obligations if a warranty is breached.
Is this article legal advice?
No. This is general information about M&A in Israel and is not a substitute for advice on your specific situation. Consult a commercial lawyer before acting.
General information only, current to the time of writing; it is not legal advice and does not create an attorney–client relationship.
