Sales, Share Sales and Acquisitions

Sales, mergers and acquisitions (M&A) involve complex legal considerations, including due diligence, regulatory approvals, and contract negotiations. These can be one of the most stressful periods of time for a business leader, which is why having the right people to offer guidance, solutions, a firm hand or an encouraging word can make all the difference.

Selling or Acquiring a Business

Selling your business, whether it’s part of a share sale or an asset sale, can release significant value with which to take with you on your next professional or personal venture.

On the other hand, purchasing an organisation, perhaps part of a merger or acquisition, can provide your business with new leads, increase your market share, and reduce competition.

The two scenarios can provide tangible benefits. But it’s important that you understand the implications of both – such as those relating to tax.

For example, as part of your sale, do you know whether you’re entitled to Business Asset Disposal Relief? If you are, how might that impact on the Capital Gains Tax payable on the disposal of assets or the sale of your business?

As with almost all other areas of your business, it’s important to have legal documents that support every step of a sale or purchase. Those documents might outline continued roles and responsibilities of all parties, they can highlight any confidentiality agreements in place, or they may set out the possibility of future negotiations between buyer and seller.

It is also important that you undertake due diligence when considering a purchase. A share sale, whereby there is a change of owner as part of a wholesale purchase of a business will require an enhanced level of due diligence in comparison to an asset sale, whereby the owner does not change, and only select assets are purchased.

Perhaps, instead, you are considering a joint venture, whereby two or more parties keep their existing companies separate but pool their resources in a contractual agreement to work towards a common objective together. That objective might be to explore markets overseas (and enter as a larger entity) or develop new products.

How Loch can help

The specialists at Loch can help you to draft the documents necessary for the purchase or sale of a business, as well as those involved when starting a joint venture. Those documents might include:

Term sheets
– These non-binding agreements form the basis of your initial purchase/sale negotiations. Once the terms have been agreed upon, they can inform the contractual documents that will legally bind the involved parties.

Non-disclosure agreements (NDAs)
– NDAs are often drafted to keep information relating to the sale or purchase of a business confidential. Without one in place, sensitive data such as sales figures and asset values could be revealed to your competitors.

Exclusivity agreements (if not covered by the term sheets)
– Also known as ‘lock out’ or ‘no talk’, exclusivity agreements outline a period of time in which the purchaser can undertake due diligence or negotiation with the seller without competition from other potential buyers.

Transactional agreements
– A transactional agreement is a legally binding contract that outlines the obligations and rights of each party. It is perhaps one of the most important documents involved in the sale and purchase of a business.

Joint venture agreements
– Entered into by two or more separate business entities who set out on an enterprise together, a joint venture agreement outlines the rights and responsibilities of each party. The agreement should highlight the contributions that each party will make towards the endeavour and describe the terms of dissolution.

If you’re the purchaser, we can also help to generate due diligence reports, important for understanding the financial health of a business, as well as establishing if there are any legal claims against it.

Whether a Transfer of Undertakings (Protection of Employment) (TUPE) is required will also be a key consideration that we can advise on.

In short, whether it’s a purchase or a sale, Loch Law can provide assistance throughout the process, making it as smooth as possible.

Does TUPE apply to my transaction?

The purpose of a TUPE, or a Transfer of Undertakings (Protection of Employment), is to protect employees when a business changes hands. If, as part of your transaction, the employer of those employees changes, a TUPE will apply.

What is commercial due diligence?

Commercial due diligence is an assessment of the risk that a buyer might encounter when purchasing a business. It will be based on several factors including the business’s financial health and legal claims made against it.

The caveat emptor “buyer beware” is heavily associated with purchasing a property, but it is also very important when it comes to the purchase of a business. Loch Law can assist you with undertaking commercial due diligence, revealing any hidden surprises well before signing any contracts.

What is the difference between a merger, acquisition, and joint venture?

A merger is an agreement between two or more companies to form a joint business, replacing the existing ones. An acquisition, on the other hand, is one company absorbing another. Finally, a joint venture keeps two companies separate, but the two contractually agree to work together towards a common goal.