Mergers and Acquisitions

Company sales and acquistions

For an SME owner, the sale of their business or a strategic acquisition of another is one of the biggest commercial decisions a business owner can face. A sale or acquisition can be several months in the making but with preparation the transaction can become smoother and investment into the company can be more attractive from a buyer’s perspective.

Always do your research

Most buyers will want to carry out commercial, legal and financial due diligence. The aim of due diligence is to uncover any ‘skeletons in the closet’ the buyer should know about pre-completion.

Depending on the findings of the due diligence, the buyer will either decide to:
• Complete the transaction;
• Reduce the purchase price; or
• Walk away from the deal

The buyer may also acknowledge that some points flagged by due diligence will need to be sorted post-completion, but they are willing to proceed regardless.

Pre-Transaction considerations

Before spending too much time and money, an SME owner may want to consider putting pre-transaction agreements in place.

These may include:

• Heads of Terms
Setting out the agreed commercial terms, this acts as a framework on which the legal documents can be prepared

• Non-Disclosure Agreement
This acts to safeguard any confidential information shared during the course of the deal

• Exclusivity Agreement
A buyer will commit finances, resources and time in pursuit of acquiring the target company. They may look for comfort from the seller that their proposed deal will not be trumped by another party by seeking exclusivity from the seller

The drafting phase

During the drafting phase the lawyers and accountants will collaborate to draft, review and, if necessary, negotiate the terms of the transaction documents. These documents may include:

• The Share (or Asset) Purchase Agreement
• Disclosure Letter
• Shareholders’ Agreement
• Loan Notes
• Articles of Association
• Deeds of Release
• Stock Transfer Forms
• Board Minutes
• Written Resolutions
• New Share Certificates
• Powers of Attorney
• Indemnities for lost or destroyed share certificates
• Letters regarding the company’s Persons of Significant Control (‘PSCs’)
• Companies House Forms

Signing on the dotted line

Once the parties are happy with the deal, due diligence has not uncovered any major issues and the legal documents are agreed. The deal may seem 99% complete, but there are still important points to contemplate

Will there be a physical or a remote completion?
Have the conditions to completion (if any) been satisfied (i.e. existing security released)?
Are completion funds in place?
Who is required to sign each document and are they lined up to do so?

Post-completion considerations

Now that the transaction has completed, no doubt both the buyer and the seller want to take a breather, however there are still important points for the parties to consider:

If the transaction includes completion accounts, the parties will need to note the dates by which these accounts need to be prepared and agreed.
Filings at Companies House will need to be made promptly.
If the buyer has bought shares in the target company for more than £1,000, the stock transfer form(s) must be submitted to HMRC within 30 days.
The buyer must update the target company’s statutory registers to reflect the transaction.
The buyer will need to sort out any issues uncovered during the due diligence process.

If you would like to discuss any of the points raised or any concerns you have please call today on 023 9298 1000 or contact one of our team below.

Michael Dyer
Principal Lawyer and Head of Business Law

Michael is Head of Business Law at Verisona Law, specialising in all areas of corporate and transactional work, including acquisitions, mergers, start-ups and MBO’s. He leads the majority of Verisona’s high-value corporate and commercial transactions, and is responsible for the co-ordination of all legal services relating to such work.

Michael qualified in 1977 and was one of the founding partners of Dyer Burdett. That firm successfully practiced in Havant for over 30 years, before it merged with another local firm in 2008 to form Verisona Law.

His commercial experience ranges from software contracts through to shareholders’ agreements and he regularly helps high profile clients in relation to media and entertainment law. He is also active in the insolvency field.

Michael is mentioned in Legal 500 (2017) as an ‘extremely sound and level-headed lawyer‘.

Client testimonials

“Mike (Dyer) quietly goes about his business; no fuss, no drama he just gets the job done. A key factor in the successful outcome was Mike’s intimate knowledge of the club. Having acted for the Trust and individual presidents on the original purchase in 2013 Mike not only had the necessary experience but also the required empathy in dealing with a stakeholder group that had made an emotional as much as a financial investment in the club.”

Trevor Birch
Managing Director
Duff and Phelps Ltd

This testimonial was given during the purchase of Portsmouth Football club by the Pompey Supporters Trust.