Solicitors for buying a business

Central London Solicitors for Mergers and Acquisitions

Our experienced lawyers have a wealth of experience in dealing with corporate transactions from smaller business sales to higher value deals. We are well positioned to navigate you through all the issues and pitfalls that may occur in a transaction.

Our corporate lawyers deal with the full range of share and asset sale transactions, from owner exits, expansions of existing businesses, strategic acquisitions and management buy-outs (MBOs). Our clients come from a wide range of industries and sectors and are based both in the UK and overseas.

Key Issues to Consider When Buying a Business

• Considering the structure of the deal – will this be a share purchase or an asset purchase? If it is a share purchase, one would expect the buyer to take over all assets, rights and liabilities of the business. Conversely, with an asset sale, the buyer may pick and choose which aspects of the business it wishes to take over.
• Purchase price – how will the purchase price be paid and when? Is the buyer prepared to offer any security for the payment of the purchase price, such as a parent company guarantee? How is the upfront payment of the purchase price is paid on completion? Is payment made through a cash or an equity swap. Are there any future payments and how will these be structured (such as by an earn-out or claw-back).
• Business assets and liabilities – buyers will wish to consider, amongst other things, whether there is a property lease, intellectual property rights, contracts with material customers and suppliers, the target’s claims history, and financial documents relating to the company. These will need to be reviewed and considered to find any red flags about the business and whether any prior approval to the transaction is required by any banks or key customers/ suppliers.
• Timing and target business internal issues – where a business is targeted for purchase it will be key to get the approach right and to ascertain the position with management, shareholders and key third parties who deal with the business. A review of the target’s articles of association and any shareholder or investment agreement will need to be considered for any provisions which may affect a sale of the business or the company’s shares.
• Employment Law – familiarising yourself with existing employee contracts (including any unusual contractual provisions), potential liabilities under TUPE, and any potential claims from current or past employees.
• Non-competition clauses – we can advise on restrictive covenants to ensure the business information is protected after completion and preventing, for example, a seller setting up in competition with the target business after completion.
• Regulatory Compliance – ensuring the business complies with relevant industry regulations is necessary to avoid future penalties or disruptions from regulators to ensure a smooth process.
• Tax Implications – understanding the tax consequences of the acquisition, including corporation tax, capital gains tax and VAT, is vital for informed decision-making. We will work with your accountants to ensure the deal is structured to your best advantage.

Key ways in which we advise and assist clients with acquisitions

• Conducting Due Diligence – we are generally heavily involved in comprehensive due diligence uncovering any potential legal risks or red flags associated with the business.
• Negotiations with Sellers – we are highly experienced in negotiating on your behalf to secure the best possible terms and to protect your interests.
• Liaising with Other Professionals – we work closely with your accountants and other relevant professionals to get the best result for you.
• Completion and Post-Completion – we deal with the completion process and address any post-acquisition legal matters that may arise.

Key Documents in Buying a Business

• Due Diligence Reports  – a critical stage before proceeding with negotiating the contractual documents and final deal terms. A comprehensive analysis, including detailed questions and requests to the seller about financial, legal and operational matters.
• Heads of Terms – non-binding agreement (although certain clauses can be expressly binding) outlines the key terms of the purchase, including price, completion date, and conditions to the purchase.
• Sale and Purchase Agreement – the contract detailing the sale of the business, including payment structure, warranties, indemnities, restrictive covenants and completion obligations.
• Disclosure Letter – prepared by the seller as the transaction progresses, the seller will expressly disclose any potential liabilities or issues in tandem with the negotiation of warranties. Put simply, the warranties are the promises made by the seller to the buyer confirming the status of the business and an inaccurate or misleading warranty may result in a breach of contract claim, so it is essential that the warranty schedule is true and complete. Matters disclosed are normally not covered by warranties.
• Tax Deed  – this key document allows the buyer to recover tax liabilities that arise from the pre-completion period but are only known after completion. These are usually drafted to allow for pound-for-pound recovery by the buyer.

How do mergers work?

With a merger, the intention is to largely integrate the two businesses into one company. Mergers are done to allow a business to expand the goods or services it offers (usually when two complementary businesses do different things in the same industry) or increase its market share within an industry (for example when two businesses, in effectively the same industry, merge to create a larger brand). A merger typically provides more resources and economies of scale and/or cost savings for a company.

One of the immediate challenges in merger negotiations is where the two businesses are of similar size. In reality, one of the businesses will usually be stronger. This will likely impact the negotiations between the owners of the two businesses.

With merging businesses, there can often be a very difficult balance between integrating staff where the staff have been vital to each of those businesses. As a result of the merger, there may be

redundant positions due to the similar roles provided by workers within each business. We can assist with managing the redundancy process in a careful, and empathetic way.

Please get in touch with our corporate team if you are considering a share purchase or business acquisition and we will be pleased to advise on next steps and a fee quote. Being a boutique law firm, we pride ourselves on providing fair and transparent pricing, while at the same time offering the same skills and expertise that are on offer in larger City firms.