Mergers & Acquisitions
Buying a business
As a buyer you take on both the opportunities and the risks of the company you acquire. We help you understand what you are buying, price the risks and obtain an agreement that protects you if something is not as presented.
When does a buyer need advice?
- You have found a target and are about to submit an indicative offer.
- The seller has sent a letter of intent or its own draft agreement.
- You need a structured review of the company's contracts and obligations.
- The acquisition is to be financed by debt, vendor loan or earn-out.
- Key people are to remain after the acquisition.
What the engagement may include
Structuring
Analysis of whether the acquisition should be a share or asset deal and the consequences for risk and transfer of contracts.
Letter of intent and exclusivity
Drafting of the offer and letter of intent with a reasonable exclusivity period and clear conditions regarding due diligence and financing.
Legal due diligence
Review of material contracts, ownership, disputes, employment terms and intellectual property, with a report focused on what affects decisions and terms.
Share purchase agreement
Negotiation of warranties, limitations of liability, specific indemnities, interim covenants and conditions precedent.
Closing and integration
Closing documents, board changes, share register and practical steps to take control of the company from day one.
Key issues for the buyer
- Change of control
- Important customer or supplier contracts may allow the counterparty to terminate on a change of ownership. This needs to be identified and addressed early.
- Scope of the warranties
- The buyer's protection is no better than the warranties, the seller's ability to pay and the agreed limitations.
- Known risks
- Risks identified in due diligence are often excluded from warranty cover. They should instead be addressed through a price adjustment or a specific indemnity.
- The seller's continued role
- If the seller stays on, clear terms are needed for employment, restrictive covenants and any earn-out.
Questions and answers
Is due diligence necessary for smaller acquisitions?
The scope can be adjusted, but a focused review of the key contracts and risks is almost always justified relative to what is at stake.
How can we protect ourselves if the seller cannot pay after the sale?
For example through retention of part of the price, an escrow account, set-off against an earn-out, or warranty and indemnity insurance, depending on the transaction.
Can we walk away after signing a letter of intent?
Usually yes, if the commercial terms have not been made binding. Exclusivity and confidentiality obligations will however normally continue to apply.
Related services
Mergers & Acquisitions
Sale and purchase of shares or businesses – from letter of intent to closing.
Legal due diligence
Review of the company's legal position ahead of an acquisition or investment.
Business valuation
A basis for negotiation in sales, acquisitions and ownership changes.
Commercial contracts
Drafting, review and negotiation of the agreements that govern your business.