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557 Pages·2022·3.528 MB·English
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Beswick and Wine: Buying and Selling Private Companies and Businesses Beswick and Wine: Buying and Selling Private Companies and Businesses Eleventh edition Susan Singleton Solicitor BLOOMSBURY PROFESSIONAL Bloomsbury Publishing Plc 50 Bedford Square, London, WC1B 3DP, UK 1385 Broadway, New York, 10018, USA 29 Earlsfort Terrace, Dublin 2, Ireland BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2022 Copyright © Bloomsbury Professional, 2022 Elizabeth Susan Singleton has asserted her right under the Copyright, Designs and Patents Act 1988 to be identified as Author of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/open- government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998-2022. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: PB: 978 1 52651 612 1 Epdf: 978 1 52651 614 5 Epub: 978 1 52651 613 8 Typeset by Evolution Design and Digital Ltd (Kent) To find out more about our authors and books visit www.bloomsburyprofessional. com. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters Contents Preface ix Dedication xii About the author xiii Abbreviations xv Table of Statutes xvii Table of Statutory Instruments xxiii Table of EC Material xxvii Table of Cases xxix Part I The Seller’s Perspective 1 CHAPTER 1 AN OVERVIEW OF THE SALE PROCESS 3 1.1 The sale process 3 1.2 Rationale for selling 4 CHAPTER 2 ASSESSMENT OF MARKETABILITY 7 2.1 Appointment of a lead advisor 7 2.2 Preliminary review of the target 7 2.3 Appointment of the project team 8 CHAPTER 3 PREPARING FOR THE SALE 9 3.1 Planning the sale 9 3.2 Shares or assets? 11 3.3 Tax planning on the sale of shares 20 3.4 Tax planning on the sale of assets 39 3.5 Methods of sale 44 3.6 Timing of sale 45 CHAPTER 4 MARKETING 47 4.1 General 47 4.2 Preparation of the information memorandum 48 4.3 Approach to prospective purchasers 49 4.4 Confidentiality 50 4.5 Distribution of the information memorandum 56 4.6 Data rooms (off or online) 67 CHAPTER 5 NEGOTIATION PROCESS 75 5.1 Selection of the preferred purchaser 75 5.2 Negotiation process 76 5.3 Response to the purchaser’s proposals 76 5.4 Heads of agreement and exclusivity 81 5.5 Response to due diligence enquiries 83 Part II The Purchaser’s Perspective 85 CHAPTER 6 AN OVERVIEW OF THE ACQUISITION PROCESS 87 CHAPTER 7 ACQUISITION STRATEGY 91 7.1 Business objectives 91 7.2 Acquisition strategy 91 7.3 The acquisition team 92 v Contents CHAPTER 8 THE SEARCH PROCESS 93 8.1 Identifying potential targets 93 8.2 Selecting and evaluating potential targets 93 8.3 Approaching potential targets 95 CHAPTER 9 NEGOTIATION 97 9.1 The negotiation process 97 9.2 Valuation 98 9.3 Price 100 9.4 Pricing structures 100 9.5 Financing the acquisition 104 9.6 Shares or assets? 117 9.7 Tax issues for the purchaser 137 9.8 Heads of agreement and exclusivity 138 CHAPTER 10 DUE DILIGENCE 141 10.1 Introduction 141 10.2 Matters requiring investigation 143 10.3 Forms of due diligence 207 Part III The Acquisition Agreement 215 CHAPTER 11 GENERAL PRINCIPLES 217 11.1 Introduction 217 11.2 Plain English 218 CHAPTER 12 SHARE PURCHASE 219 12.1 Share purchase agreement or offer document? 219 12.2 Share purchase agreement 222 Annex Competition and Markets Authority Mergers Guidance 273 CHAPTER 13 BUSINESS TRANSFER AGREEMENT 281 13.1 Introduction 281 13.2 Business transfer agreement 281 Part IV Post-completion 311 CHAPTER 14 ANNOUNCEMENTS AND NOTIFICATIONS 313 14.1 Notification of aquisitions falling within competition law merger rules 313 14.2 Notifications 313 14.3 Consumer credit licence approval – FSMA 2000, s 178 notices and the FCA 314 CHAPTER 15 IMPLEMENTING CHANGES TO THE WORKFORCE 315 15.1 General considerations 315 15.2 Redundancy 316 15.3 Changes to terms and conditions of employment 317 15.4 The implications of TUPE 2006 317 15.5 Consultation 318 15.6 Changes to the target’s board of directors or senior management 320 CHAPTER 16 STAMP DUTY 323 16.1 General principles 323 16.2 Share purchases 323 vi Contents 16.3 Business transfers 326 16.4 Paying stamp duty on shares 328 Part V Special Situations 331 CHAPTER 17 BUY-OUTS 333 17.1 Introduction 333 17.2 Conflict of interests 334 17.3 Due diligence 335 17.4 Shareholder consent 337 17.5 Financial assistance 337 17.6 Tax considerations 337 17.7 Warranties/disclosure 338 17.8 Assignability of warranty/indemnity claims 340 CHAPTER 18 BUYING AND SELLING TECHNOLOGY BUSINESSES 341 18.1 Introduction 341 18.2 Distinguishing features of the sale and purchase of a technology business 341 18.3 Due diligence 347 18.4 Employees 350 Part VI Precedents 353 Precedent A – Confidentiality letter 355 Precedent B – Data room rules 361 Precedent C – Offer letter: share purchase 365 Precedent D – Offer letter: business transfer 371 Precedent E – Due diligence request 377 Precedent F – Share purchase agreement 391 Precedent G – Limitations on warranty liability 439 Precedent H – Business transfer agreement 445 Precedent I – Disclosure letter 487 Precedent J – Completion agenda 491 Precedent K – Target board minutes 493 Precedent L – Power of attorney 497 Precedent M – Deed of contribution 499 Index 505 Downloadable precedents 521 Licence agreement 522 vii Preface This book is primarily designed for solicitors, accountants and corporate financiers involved in private company mergers and acquisitions. It seeks to provide a step-by-step guide to the sale and purchase process and the key commercial, tax and legal issues arising from it. This edition is, and earlier editions were, written by practitioners actively engaged in private company merger and acquisition transactions. It is structured to reflect the buying and selling process in practice and considers the issues arising from both the seller’s and the purchaser’s perspective. The sale and purchase process varies depending upon the identity of the party initiating it. Accordingly, in Part I, the book covers the sale process from the seller’s perspective and, in Part II, the acquisition process from the purchaser’s perspective. The book covers most of the issues which the seller or purchaser (and their advisers) are likely to encounter. Due to the way this book is structured, issues of particular significance to the sale and purchase process are not addressed as separate topics in the conventional manner. Instead they are addressed in the context in which they would usually appear in the transaction. This eleventh edition, the fifth for which the current author Susan Singleton has been responsible, reflects the impact of a number of significant changes to the law and applicable regulations since the last edition. In particular it has been revised to include: •• Finance Acts 2017–2021 which reflect changes to tax law; •• changes to corporation tax and stamp duty; •• Brexit where relevant and competition law changes including from 1 January 2021 when the post-Brexit transitional period ended and 4 January 2022 UK merger law changes for certain sensitive sectors contained in the National Security and Investment Act 2021 and accompanying guidance. A full range of useful precedents is provided by way of online access using the password provided. The companies expressed to be bought or sold in this book are: (i) unquoted; and (ii) limited by shares and incorporated under the Companies Acts; and (iii) private. Although some acquisitions are of public companies and indeed when I worked at Slaughter and May that would frequently be the case, most acquisitions in the UK are not of public companies and my practice since has largely been private sales and purchases. This is the market addressed by this book. Readers should be aware there are important additional rules applicable to sales of public companies which are not addressed in this book. In the case of a sale of shares this book assumes that, unless specific reference to a corporate seller is made, the seller is an individual. In the case of a business transfer the seller is assumed to be a corporate seller. This book also assumes that the purchaser is a single, corporate purchaser. The company or the business to be sold and purchased is subsequently referred to as the ‘target’. ix

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