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. Notable examples include non-compete and entire agreement clauses.
- Non-Compete Agreement: a promise from the seller that if the deal goes ahead, the seller will not start up a similar business and emerge as a competitor of the business being acquired. Such agreements will usually apply for a limited period of time (typically 3 years) and/or apply only to regions in which the business being acquired already operates
- Entire Agreement Clause: clause stating that only the terms contained within the contract apply to the agreement and thus any previous negotiations or oral statements that are not recorded in the contract do not apply or bind the parties.
The parties to a transaction will also usually subject the Sale and Purchase Agreement to conditions precedent.
- Conditions Precedent: conditions that must be fulfilled before full performance under a contract becomes due. Notable examples of conditions precedent include the verification (through due diligence) of all the key promises made by the seller prior to the transaction and the receipt of clearance from the relevant competition authorities.
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By Jake Schogger - City Career Series