The Commercial Acquisition process
Our commercial acquisition solicitors objective will be to transfer the ownership of the acquisition from the owner to the buyer.
Whether they are shares or the assets of the business, as appropriate.
We will identify any risks of a legal nature and seek protection from these risks as far as possible.
At what stage do you need an acquisitions lawyer?
Our Heathrow commercial acquisition Solicitors can advise you on the aspects.
It is difficult to isolate the legal aspects from the commercial aspects.
It is therefore important for us to be involved as early as possible in the parties negotiations.
This is particularly where the lawyer is asked to give taxation advice in relation to the acquisition.
The way the acquisition is structured can have a significant bearing on the parties tax position.
If the client delays in instructing the lawyer, it may be too late to choose the most tax efficient method.
We will also ensure that you do not enter into any binding commitments and that all negotiations are subject to contract.
Client could commit a breach of FSMA 2000.
Which can be used as a starting point for negotiations with potential buyers.
The buyer’s accountant will go through a similar exercise and will determine the parameters of negotiation.
The buyer’s principle motive may be to prevent the target from being acquired by a competitor.
However the buyer may wish to acquire a competitor therefore reducing competition out to acquire a supplier in order to protect the source of supply.
A valuation based solely on net assets of the target is rare as it will not usually reflect the true value of the target as a going concern.
It is appropriate for an asset sale of an ongoing business only in so far as the valuation.
For example it includes a figure for goodwill and the valuation of this intangible asset is itself likely to be earnings based.
Earnings based valuation
The main pointer towards this potential is the level of profit achieved by the target in the years leading up to proposed earnings.
Appropriate adjustments to the profit figures appearing in the accounts will be necessary.
However, profits can be overstated.
For example goods or services have been supplied to the target on favorable terms.
This is through connected persons and those arrangements discontinue after completion.
The next stage is to apply a multiplier to the figure reached above in an attempt to capitalize the future capacity of the target.
Valuations for auction bids-debt free/cash free
Where a target is being sold at auction, accountants may also be asked to prepare a valuation for an indicative bid.
The bids on an auction of have to be put forward on the basis that buyer will refinance any of the companies existing borrowers.
Which will then remain after all available cash in the company has been applied.
Where the price of the target has been arrived at on the basis of net assets or profits.
The parties may not wish to rely on out of date audited accounts or unaudited management accounts containing this information.
In sale and purchase agreement will usually provide for the drawing up of completion accounts following completion.
If a price has been agreed on a debt free/cash free price the auction bids are based on interest value.
The market share test involves an assessment of when goods or services are of a separate description and form a distinct market.
On a private sale, the buyer’s lawyers will usually provide the first draft of the contract documentation.
Negotiation of the sale and purchase agreements will often run alongside the investigations.