Mander Hadley Solicitors, which has offices in Coventry and Kenilworth, is recommending that prospective purchasers seek legal advice early on the purchase process.
John Morgan, a Senior Associate at Mander Hadley Solicitors, said: “Specialist advice is crucial – preferably from an early stage.
“From an acquisitions perspective, you will need to start by identifying an appropriate business you would like to acquire which will enable you to pursue your intended goals.”
He said that in most instances, the seller would not be willing to open their books and disclose trading information without the protection of a confidentiality agreement in place.
“In return, you will want to negotiate an exclusivity period during which the seller will not embark on negotiations with any other businesses,” added John.
“At this stage, with the assistance of accountants, a detailed investigation of the target business’s financial record should be carried out to identify any issues which could have an influence on the sale price and the decision to proceed.”
He said that the next step should be for non-binding Heads of Terms to be drawn-up, outlining the principal terms of the transaction, an estimated timetable to completion and whether it is to be an ‘asset sale’ or, if the target is a private limited liability company, a ‘shares sale’.
John said: “Typically, it is at this point that legal due diligence will commence with an in-depth investigation into all aspects of the target business, including its commercial contracts, ownership of property and assets, hire purchase and leasing contracts, employment contracts, pension obligations, insurances, banking relationships and compliance obligations.
“The solicitors will be working in liaison with the buyer’s accountants on the financial and taxation aspects to ensure that the seller has complied with its tax, National Insurance and VAT obligations.”
He added: “Central to the acquisition process is the asset purchase agreement or share purchase agreement.
“In either case, this will be a detailed contract which is subject to extensive negotiations between the respective solicitors, with the buyer’s solicitors seeking protections in the form of a wide range of warranties and, if necessary, appropriate indemnities.
“If the transaction is a share purchase, the agreement will contain tax warranties and a tax covenant too – the purpose of which is to ensure that the seller remains responsible for all taxation matters up to the point of sale.
