Other than the purchase price, what should purchasers consider in M&A transactions?

In M&A deals, purchasers should consider aspects beyond the purchase price that could impact their acquisitions.

The following are three factors to consider:

1. Guarantee for the target’s borrowing

If the target has financing facilities guaranteed by the seller, does the purchaser need to assume the guarantee post-acquisition?

2. Employees share option or incentives schemes

Has the target granted any employee share option schemes or incentive schemes to its employees?

What are the consequences in the event of a change in control of the target under the terms of the schemes?

The seller and purchaser should outline how these schemes will be managed post-acquisition.

3. Contingent liabilities of the target

Does the target have any contingent liabilities?

What is the nature and likelihood of these contingent liabilities materialising?

The purchaser may consider negotiating a purchaser price adjustment mechanism in the sale and purchase agreement to address the contingent liabilities.

While the final purchase price is important, there are other considerations that purchasers need to take into account to ensure the overall success and value of the deals.

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This post was posted on LinkedIn on 21 March 2024.