Structuring payment of purchase price for M&A transactions

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You need to consider the following when structuring payment of purchase price for M&A transactions:
1. Amount of purchase price/ the way in which it is to be determined
2. Time for payment of the purchase price
3. Manner in which the purchase price is to be satisfied

Purchase price may be:
– A fixed amount
– Subject to earn-out
(where the purchase price depends on future performance of the target company)
– Subject to completion accounts
(where the purchase price is subject to adjustment if the final valuation of the target company on a specified cut-off date as set out in completion accounts vary from the initial figure)
– Payable on completion
– Payable in one tranche or multiple tranches
– Subject to retention against claims which may reduce the value of the target company
– Payable in cash
– Satisfied other than in cash such as by way of issuance of shares

This post was first posted on Linkedin on 3 June 2022.

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