Mergers & Acquisitions

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1 Mergers & Acquisitions A new approach to professional services

2 Oury Clark Page 1 Mergers & Acquisitions Successfully growing, selling or restructuring a business can The successful execution of corporate transactions - whether or buy out - requires careful consideration of the legal and mean that both you and your advisors never lose sight of your

3 Page 2 Mergers & Acquisitions 1. Structure be determined by commercial issues such as the synergy with Shares Or Assets acquisition are either to buy the shares in the company that owns the business, or to buy the business and related assets tend to lead buyers to favour asset sales and sellers to favour From a legal perspective an acquisition of shares is generally more straightforward, as by acquiring the shares in the company an asset acquisition, it is the company selling you its business and so any asset in the name of the company, whether tangible or intangible, such as freehold or leasehold property, intellectual

4 Oury Clark Page 3 Price and Payment Negotiations between a buyer and seller will be dominated by preference will clearly be for the full purchase price to be paid Resource a buyer may not have the full amount of the purchase price available to it at the outset and so may want to defer some of it to be paid at set intervals post completion Performance if the target is less asset based and more service orientated, a buyer will want to apportion some of the price towards the future performance of the business Completion accounts if the parties have been negotiating paying an amount based on an estimated value of the and with potential for disagreement but is usually the preferred choice of the buyer price is what the buyer will pay whenever the transaction intended to prevent the seller from stripping out any value will be allowed such as payments in the ordinary course of business

5 Page 4 Mergers & Acquisitions 2. Preliminary Stages Heads of Terms (Heads) clarify what has been agreed and provide a reference point for and exclusivity information to each other or to their advisors, it is standard governing the terms of use of information Advisors team of advisors, the size of which will depend on the complexity advisors will include lawyers, accountants, tax consultants and services such as pensions advisors and regulatory consultants

6 Oury Clark Page 5 3. Due Diligence Key for any buyer is the need to gather as much information as important and continues from the early pre legal stages through until it can appear to be a tortuous process, it is preferable that the seller is honest and transparent with the buyer rather than the buyer having diligence exercise will again depend on the nature of the target on the following areas:- Commercial Representatives of the buyer will want to spend time with their Legal compliance records as well as details of any on-going and historical litigation, insurance policies and claim history, employee

7 Page 6 Mergers & Acquisitions 4. Share/Asset Purchase Agreement Agreement which sets out the commercial terms of the transaction in a binding legal format covering amongst other things:- Timing There may be a reason why the parties wish to exchange contracts completion of the transaction is conditional upon a certain event such business in any way seller are repeated each day after exchange right up to the breach any warranty and to inform the buyer immediately in Supplemental Disclosure if a buyer insists on the warranties This would be done by way of a supplemental disclosure letter Remedies if the warranties are repeated and a supplemental disclosure exercise is permitted, the question then arises as to the remedies available if an event does occur during will want to at least limit that remedy to circumstances where the breach is material

8 Oury Clark Page 7 Price and Payment The buyer and the seller will have agreed the price and payment by way of earn out or distinct guaranteed deferred payments, the seller will want to try and protect that deferred element as much deferred period with the general aim being to prevent the buyer want to be too tightly restricted to what it can and cannot do with the business it has just acquired Warranties The warranties given by the seller tend to be the focus of a large of the warranties given is as narrow as possible and limited to facts A focused commercial approach should be adopted by both parties:- Relevance the schedule of warranties should be, to some pages of property and environmental warranties when the due property interests it to give warranties in relation to events outside of its control

9 Page 8 Mergers & Acquisitions that it has no reason to believe that such an event may comfortable that it is being told the whole story whilst not Liability a buyer may feel that some warranties, such as those relating to ownership of the shares, are so fundamental that it needs the ability to not only claim damages on a standard contractual basis where there must damages even in the event it cannot prove that the breach of warranty actually led to a negative impact on the value of will depend on the relative bargaining strength of the parties and the comfort the buyer has gained through due diligence Indemnities could include unresolved or anticipated litigation, missing title exclude such liabilities from the limitations agreed with the seller (see below) although it would be reasonable to agree to include Limitations A seller will attempt to limit its liability for breach of warranty claims The seller will also want to impose a time limit within which the buyer

10 Oury Clark Page 9 Restrictive Covenants completion to prevent the value of the business acquired being from carrying on any business in competition with the target, interest in the target and the imposition of a restraint of trade are in place following completion needs to be reasonable 5. Disclosure Letter to be untrue, the buyer will have a claim for breach of contract but not if the facts which gave rise to the breach were disclosed to it by the Fair To avoid uncertainty it is vital that the seller discloses everything should not accept any disclosure unless it has had the full opportunity to review, understand and investigate that disclosure General Disclosures The scope of the information and documentation considered to possible and insist on only accepting documents and information that it has actually been provided with rather than information it

11 Page 10 Mergers & Acquisitions warranty being given then rather than delete the warranty it should disclosure those facts with as much detail as is reasonable to allow the buyer to ascertain the potential impact they may have on the buyer is already aware of rather than bringing to light a list of last minute liabilities 6. Tax Virtually all acquisitions include a tax covenant or a tax indemnity which will vary in complexity depending on the nature of the apportion unpaid pre-completion tax liabilities of the target between liabilities that remain outstanding at completion and which arose or of ownership should give rise to a pound for pound claim by the 7. Property

12 Oury Clark Page Employment TUPE employed by the seller and assigned to the business that is the subject of the acquisition will transfer to the buyer under their existing terms of employment with their continuity of employment allocation of liability for employee related issues, the parties need Service Agreements contracts or senior employment contracts Compromise Agreements post completion and that it is best dealt with by way of terminating 9. Intellectual Property (IP) property then due diligence will focus on that to ascertain the extent

13 Page 12 Mergers & Acquisitions 10. Finance Running alongside the main transaction documentation will be

14 Oury Clark Page 13 The Team Juliet Oury James Oury Jonathan Ashi Patel Ross Meadows Rina Sond Ben Robson advising on acquisitions in sectors such as technology, life sciences, pharmaceutical, hotels, engineering, sport, media commercial, real estate, employment, intellectual property and with a wealth of experience in providing a wide range of legal,

15 Page 14 Mergers & Acquisitions The Experience Recent experience includes:- Acting on behalf of a global provider of analytical and safety evaluation services to the biotechnology and pharmaceutical private equity investment partner in a deal worth 42m training operator Advising a leading London hotel group on the sale of three boutique Acting for a leading Australian information company in its information services Advising on the sale of a business developing diagnostic technologies of medical point of care products in a deal with a maximum consideration of 8m Advising a middle-eastern royal-owned sailing organisation in its 5m dealership chain Acting for the shareholders of a company specialising in the design, programs for technology companies such as Microsoft, Vodafone,

16 Oury Clark Page 15 The Service A successful merger and acquisition strategy begins with an honest assessment by the client of the existing business model, advisors providing the guidance to see the strategy through to Success not only means getting the deal done but getting the right experience and enthusiasm to act as your business partner in order Our team focus on providing an in-house counsel approach to help ourselves as leaders in professional advice and assistance for nature of our client base and our own people, we have a unique

17 Page 16 Mergers & Acquisitions For further information

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