M&A: Should seller accept shares as consideration?
In the sale and purchase of a business, the seller may receive payment by way of shares issued by the acquiring corporation (i.e. consideration shares) instead of cash. Before accepting payment in the form of consideration shares, the seller should consider the following: 1. Assess the liquidity of the consideration shares …
M&A: Challenges when the parties are private equities
One of the most challenging M&A negotiations I had was when both the seller and buyer were private equities. It should be noted that private equity funds are primarily focused on maximising returns for their investors and expediting the distribution of proceeds. Therefore, retaining a portion of the purchase price …
How does a company control its shareholder composition?
One common reason for a company to control its shareholder base is to prevent a shareholder who is no longer actively involved in the day-to-day operation of the company from exerting influence over the company. A company may achieve this control through compulsory transfer provisions. These provisions typically require officers …
M&A: What business owners should take note when selling their business
Business owners who are strategically developing their business with the intention of selling in the future should take note of the following: 1. Some potential buyers may want assurance that there is a management team who can run the business effectively after the business owners’ exit. To incentivize key management …
Exclusivity period in M&A
In the M&A context, an exclusivity period means that for a certain period of time, the seller agrees to negotiate only with one potential buyer. From the buyer’s perspective, it is beneficial to have a longer exclusivity period for the following reasons: 1. A longer exclusivity period gives the buyer …
M&A: It’s not always about getting the best terms
There’s always a little excitement whenever I start an M&A exercise. My excitement is tempered by what I know is coming- tight deadlines, work around the clock and lots of coffee. I always want to do my best for every deals. For me, this means getting the best deal for …
M&A: Categorising vendor’s representations and warranties
One of the most negotiated points in a M&A transaction is the buyer’s remedies for breaches of vendor’s representations and warranties (“Vendor’s Warranties”) in a sale and purchase agreement (“SPA”). The various representations and warranties given by the vendor, if breached, may affect the transaction in varying degree. It may …
M&A: Three representations and warranties sellers should avoid
1. Representations and warranties about the future A seller should avoid providing representations and warranties in respect of future events due to uncertainty about the future. Further, after the seller disposes of the seller’s shares, the seller may no longer be in control of the target company and hence, not …
M&A: Minority shareholders’ protection
Today’s post is about provisions in shareholders’ agreement for the benefit of minority shareholders. It is common to have a shareholders’ agreement when an M&A transaction results in more than one shareholder in the target company. Some provisions to include in a shareholders’ agreement for the benefit of a minority …
M&A: Consider the following when structuring earnout payment
Earnout provisions in M&A sale and purchase agreements require careful consideration as there are many parts to the provisions. It is important to ensure there is no ambiguity to avoid dispute. Consider the following when structuring earnout payment: 1. What is the performance metric that needs to be achieved in order …