materials are for generic presentation purposes only and do not constitute legal advice which may be...

Materials are for generic presentation purposes only and do not constitute legal advice which may be relied on in any situation

© Matthew Arnold & Baldwin LLP, 2014. All rights reserved.

How to increase your value & buy or sell your business

Legal perspective

Emma Cameron

Partner, Corporate Team



The importance of knowledge

“I’ve destroyed 3 rain forests for them!”

“I thought I would save the cost”

“But it was only 5% of the shares”

“I didn’t have the time to keep my records”

“I can’t do this – there is too much to do”



Overview

1. Preparation

2. Finalising the deal

3. What the process involves

4. What each party requires and why

5. Practical obstacles



Preparation

• Start now

• Ducks in a row…

– worthwhile to the seller

– smoother deal for the buyer

– funding – banks/private equity/capital markets

• What type of deal – selling/buying shares or selling/buying assets?

– the difference

– liability

– contracts

– employees

– what will your lawyer need to do differently?



Finalising the deal

• Heads of Terms

• Confidentiality

• Exclusivity

• Costs protection

• Realistic timeframe



What the process involves

• Due diligence and information gathering

• Documentation:

– to reflect commercial deal

– to allocate risk between parties

• Negotiation/meetings

• Finance aspects

• Dealing with employees

– TUPE

– due diligence

• Final documentation will be the deal – not things said/done before

• Time commitments



What each party requires and why

• Buyer – protections

– warranties

– indemnities

– retention

– completion accounts

– restrictive covenants

– deferred consideration – and earn out?

• Seller – security and defence

– as much risk free money as possible?

– greater potential sum but more risk?

– security for deferred consideration

– disclosures and limitations on warranties



Practical obstacles

• Gulf in risk allocation

• Awkward other lawyer

• Third parties – landlord/financier/change of control

• Relative size and sophistication of seller and buyer

• Buyer from a different jurisdiction



Ignorance is not bliss

“I’ve destroyed 3 rain forests for them”

eco-conscious seller who underestimated the sheer volume of information required by the hungry NASDAQ-listed buyer




“I thought I would save the cost”

Seller of a telecommunications software company which made the decision not to have its trading terms drafted properly and ended up giving indemnities to the buyer because of the buyer’s perception of risk and unlimited claims from customers




“But it was only 5% of the shares”

Owner – manager who gave employees 5% of his share capital without protective provisions in the articles or shareholders’ agreement

Result – held to ransom and the minorities got an enhanced value




“I didn’t have the time to keep my records”

Potential seller whose deal fell apart because the buyer lost confidence in the business – perceived too great a risk because nothing was tied down




“I can’t do this – there is too much to do”

Seller whose deal delayed because he could not devote the time to it – leading to stress and a more difficult negotiating position



Contact

Emma Cameron Partner, Corporate Team E: [email protected]: 01923 690038

Matthew Arnold & Baldwin LLP - Solicitors85 Fleet Street, London, EC4Y 1AE21 Station Road, Watford WD17 1HT

E: [email protected]: www.mablaw.com



These slides have been produced only for the purposes of illustrating a talk given by Emma Cameron on 23 September 2014. They are not intended to be relied upon by any party and cannot constitute advice. Matthew Arnold & Baldwin LLP cannot be responsible in any way for any material contained herein.

materials are for generic presentation purposes only and do not constitute legal advice which may be...

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