M&A from the purchaser’s perspective: Obligations and liabilities

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In an M&A transaction, the purchaser should consider whether any of the following obligations and liabilities are relevant to its acquisition:

1. Where the target has obtained financing facilities which are secured by guarantee provided by the seller in favour of financial institutions, is the purchaser required to step in and assume the guarantee given by the seller after completion of the acquisition?

2. Has the target granted any employee share option schemes or incentive schemes to its employees? If yes, what are the consequences for change in control of the target under the terms of the schemes? How do the purchaser and seller intend to deal with the schemes in view of the sale and purchase of the target?

3. Does the target have any contingent liabilities? If yes, what is the nature of the contingent liabilities and the possibility of the liabilities materialise? Should the seller and purchaser provide for price adjustment mechanism in the sale and purchase agreement to address the contingent liabilities?

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This post was first posted on Linkedin on 14 January 2023.

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