1. Due diligence

A seller may allow a buyer and its advisers to conduct due diligence on the target company or target asset up to a cut-off date. This is the process of finding out whether there is any major issue which may affect the M&A transaction or the buyer’s decision to acquire the shares of the target company or target asset.

2. Negotiation and execution of agreement

The seller and purchaser negotiate the terms of the sale and purchase agreement (“SPA”). If there are major issues found during the course of due diligence, the buyer may require the seller to resolve the issues before execution of the SPA. Alternatively, the buyer may want to include certain clauses in the SPA to protect the buyer’s interest.

If the parties are corporations, resolutions are required to authorise the SPA execution on behalf of the corporations. If a PLC or its subsidiary is party to the SPA, announcement to the stock exchange may be required.

3. Fulfilment of conditions precedent

The parties to the SPA show that they have met the conditions precedent within the agreed period. The SPA becomes unconditional at this point.

4. Completion of the SPA

SPAs typically provide for certain actions to be done or documents to be delivered to the counterparties on completion e.g. delivery of share transfer form against payment of consideration. A PLC may need to announce the SPA completion to the relevant stock exchange.

5. Post completion obligations

SPAs may provide for post-completion actions such as notifying the relevant authorities of change of shareholders of the target companies.

The information in this article is intended only to provide general information and does not constitute legal opinion or professional advice.