Do you know why people acquire Businesses?

There can be a lot of reasons for it.

It could be to get access to technology, such as patents, or other IP.

It could get a better positioning in the market.

The reasons can be plenty.

But do you know how to go forward with it?

Let me share with you in this case study.

Our client was running a service-based company.

He wanted to acquire some other company that could supplement their range of services.

They had many informal discussions with the other company. But now they both had agreed to start the process of acquisition.

As you might know, there are different methods to acquire a company.

But our client wanted to acquire by buying out the entire shareholding from the existing shareholders.

Problems:

1. Comprehensive Agreement for Share Transfer:

Our client (buyer) wanted to ensure the agreement deals with all aspects of share transfer/ purchase.

2. Valuation and Due Diligence Challenges:

The Buyer had done a valuation of the Target Company.

And agreed on a per-share purchase price with the seller.

However, the price was subjective to any infirmities that could be discovered in the due diligence process.

3. Smooth Execution and Compliance:

The Buyer wanted to ensure smooth execution and ensure all parties performed all their pre and post-closing obligations.

Solutions:

1. Share Purchase Agreement

After a few meetings and comprehensive discussion, we understood the transaction, the needs of our client, and what had been orally agreed.

Based on the discussion, we drafted the document covering everything.

From the current shareholding pattern, purchase consideration, key obligations, reps, and warranties.

2. Terms Subjective To Due Diligence

Upon due diligence, certain infirmities were found.

Some of which may have a close impact and some may have an effect after a few years.

This included pending IPs and tax inquiries.

The results could not be foreseen and thus, protection was required for our client.

For such events where the outcomes could not be foreseen, indemnification was sought from the selling party.

As there were frequent developments on both sides, while the process was being carried out, the agreement had to be altered to suit the present needs.

3. Advised on Execution

Finally, after a few rounds of negotiations, the final draft was ready to be executed, the client just wanted to make sure everything was sound legally.

We then advised on stamp duty payable and attestation requirements, along with the immediate next steps required for each party.

Business acquisition in no way is an easy process.

There are a lot of complexities to be considered, especially when understanding the full transaction.

But by the end, we ensured the client had a robust legal framework in place to facilitate a seamless acquisition process.

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