Basis for pricing in M&A transactions

Linkedin Post

As a buyer, there may be a price or earnings multiple or other basis which you use to value the business or company that you buy.

In such instance, you may want to consider including a clause in the sale and purchase agreement to state that the parties acknowledge that the price for the business or shares has been calculated on this basis and any damages for breach of warranty will be calculated by reference to the basis.

Although the clause may not be regarded as conclusive in a court, it is likely to be helpful to the buyer in determining the damages.

However, it should be noted that such clause should be a reasonable estimate of the buyer’s loss so that it will not be deemed as a penalty and rendered unenforceable.

#malaysiancorporatelawyer
#mergersandacquisitions

This post was first posted on Linkedin on 1 June 2021.

Due Diligence
Legal Due Diligence on Public Listed Companies in Malaysia

When conducting legal due diligence on public listed companies (PLCs) in Malaysia, the scope of due diligence is limited by the laws of insider trading. Insider trading occurs when someone uses confidential, non-public information about a company to make a profit or avoid a loss in the stock market. Therefore, …

Linkedin Post
Don’t Rush the Disclosure Letter in M&A Transactions

In M&A transactions, a disclosure letter sets out the exceptions to seller’s representations and warranties in a sale and purchase agreement for an M&A transaction (“SPA”). Instead of negotiating heavily on sellers’ representations and warranties in SPAs, it is common to provide in SPAs that sellers’ representations and warranties are …

Lawyering
Is Corporate Practice Less Stressful Than Litigation?

I was asked whether being in corporate practice is less stressful and less hectic than being in litigation practice. I think this kind of generalisation is not particularly helpful. Different law firms have different cultures and expectations of their lawyers. Clients’ demand would also determine whether a particular project or …