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.

Linkedin Post
Partial Share Sales in Malaysia: What Sellers Need to Know About Guarantees

In partial disposals, it’s common for sellers and buyers to agree that any existing guarantees given by the sellers to secure banking facilities of the target companies will be adjusted to reflect the post-completion shareholding. For public listed companies (PLCs) in Malaysia, this can affect the deal timeline if not …

Linkedin Post
M&A Break Fees: Practical Constraints in Malaysia

In M&A transactions, break fees refer to a pre-agreed sum payable if a party withdraws from a proposed transaction without any breach by the counterparty. In principle, break fees are intended to deter frivolous exits and to compensate the other party for transaction-related costs, including due diligence and advisory expenses. …

Linkedin Post
M&A Disclosure Letter: DIY or Get a Lawyer?

In M&A transactions, a disclosure letter sets out the exceptions and qualifications to the representations and warranties (R&Ws) given by a seller in a share sale and purchase agreement (SPA). Getting it wrong can turn an unintentional misstatement into a breach of contract, with serious legal and financial consequences. Should …