Without adequate protection, buyers may be left with unexpected liabilities or without a remedy if, after the deal is completed, it transpires that the agreements made or expectations generated prior to completion have not been upheld. There are numerous ways in which lawyers can help clients mitigate this risk, such as seeking competition clearance in advance, conducting thorough due diligence and ensuring various contractual provisions are in place in favour of the buyer, including warranties and indemnities.
Click the links below to find out more
Due Diligence refers to the process under which a potential buyer and its advisors carry out in-depth investigations into many aspects of a proposed target company, in order to gain a solid understanding of that company’s business and/or market. Due diligence can help a potential buyer to decide whether to go ahead with the purchase and if so, at what price and on which terms.
- Unless the contrary is agreed, once firms have been acquired, the new purchasers assume responsibility for any existing liabilities of the acquired company. It is essential that the purchaser is made aware of such liabilities, as this may influence their decision to buy and the price they are willing to pay.
- Clearance must usually be secured from the relevant competition authorities (such as the European Commission) for proposed mergers or acquisitions. If the proposed transaction could significantly reduce competition in the market (for instance through creating a monopoly) the transaction may be deemed anti-competitive in accordance with various regulations.
- Acquisitions will typically involve the transfer of tangible assets such as inventory, machinery, buildings and vehicles and intangible assets such as shares and intellectual property rights.
Lawyers must check whether key actors in the supply chain such as employees, suppliers, distributors and customers have change of control clauses in their contracts.
- There are various other contractual protections available that can pre-empt and mitigate, or help to determine the outcome of, potential issues that could arise post-acquisition.
Read more here:
By Jake Schogger - City Career Series