Don’t follow precedents blindly
In M&A transactions, whenever I see the following in a draft transaction document, I guess the person preparing the draft has been copying from precedents without checking: 1. The draft refers to authorised share capital although the concept of authorised share capital for a Malaysian company has been abolished since the …
Have clear definitions in M&A agreements
In M&A transactions, the following terms are open to interpretation if used in transaction agreements without being defined: 1. Family Does “family” mean immediate family or extended family? Do the parties to the agreements intend for the term “family” to include adopted children, spouses of siblings and grandparents? 2. Affiliate …
Due Diligence for M&A transactions
𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝘄𝗵𝗶𝗰𝗵 𝗯𝘂𝘆𝗲𝗿 𝗰𝗮𝗻 𝗴𝗲𝘁 𝗳𝗿𝗼𝗺 𝗱𝗶𝗿𝗲𝗰𝘁𝗼𝗿𝘀’ 𝗮𝗻𝗱 𝘀𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗲𝗿𝘀’ 𝗺𝗶𝗻𝘂𝘁𝗲𝘀/𝗿𝗲𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻𝘀 𝗼𝗳 𝘁𝗮𝗿𝗴𝗲𝘁 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 • Whether shares have been properly issued with shareholders’ approval? • Has the target company circulated annual financial statements to shareholders? • Have the directors approved any unusual dividends? • Where a director is interested in a …
Binding clauses for term sheet
The first document that I usually draft for an M&A transaction is the term sheet (sometimes referred to as the letter of intent/ heads of agreement/ memorandum of understanding). The purpose of a term sheet is to serve as a framework for drafting the definitive sale and purchase agreement. A …
M&A: What to include in condition precedent clause
In a sale and purchase agreement for an M&A transaction, a condition precedent is a condition which must be fulfilled in order for the sale and purchase to proceed. A clearly drafted condition precedent clause should include the following: 1. What is the desired outcome/condition precedent to be fulfilled? 2. …
M&A: Safeguards for buyers
In an M&A transaction, a purchaser may find that well-drafted representations, warranties and indemnities provided by the seller are not particularly helpful if the seller does not have the financial means to pay damages or honour the indemnities. Four ways to avoid this: 1. The seller to provide bank guarantee …
Corporate law: More than just business
I decided early in my career that I would not go into practice areas which are more “personal”. Corporate laws seemed to be a more neutral choice. I probably got this wrong. *** One of the transactions I was involved in gave me a different insight. The vendors sold their …
M&A: Plan ahead for signing
In M&A transactions, when parties are busy negotiating the terms, planning for the signing of the transaction agreements may be the last thing on their mind. Plan ahead for signing. 1. What needs to be delivered to the counterparty upon execution of the transaction agreements? 2. Ensure the resolutions which …
A lawyer’s job
In M&A transactions, lawyers are naturally inclined to draft and negotiate agreements that put our clients in a strong legal position. That is our job. For a buyer, it may mean providing for the following in the sale and purchase agreement (SPA): – solid representations and warranties by the seller …
M&A: Term sheet in M&A transaction
𝘜𝘴𝘦 𝘢 𝘵𝘦𝘳𝘮 𝘴𝘩𝘦𝘦𝘵 𝘧𝘰𝘳 𝘵𝘩𝘪𝘴 A term sheet is used in M&A transaction to set out the key commercial terms such as price, basis for price adjustment, earn out, profit guarantee and execution of new employment agreements with key employees of the target entity. The term sheet may be …