#4782 - Completion - Mergers and Acquisitions (Private Acquisitions)

Key players in MBO

1. PEF and their lawyers

2. Bank and their lawyers

3. M and their lawyers

4. accountants

5. S and their solicitor

Parties

Investment/Subscription/Equity Agreement

• similar to S’ers Ag

• parties will be: PEF, M, N1

• seeks to establish:

• what M can and cannot do w/o consent of PEF. PEF consent usually required for: issue of shares, changes to N1 arts or any of its subs (inc N2), change in nature of business and entry into, or termination, of material contracts

• how ratchet provisions work (if any)

• W given by M to F. These are not w/standing that PEF will have carried out extremely thorough DD on T. This is because much of info in DD exercise is based upon that provided by M to PEF (on MBO). These W provided PEF w/contractual action against M (although v.rare) and include: Ws re r’ableness of business plan prepared by M, accuracy of financial info used to construct business plan (cf. s.393 CA), accuracy of info given to lawyers and accountants preparing DD reports. Ws will be disclosed against by M in DL which accompanies IA.

Arts of N1

• in addition to standard arts, you would also see:

• dividend entitlements

• rights of s’ers on return of capital

• pre-emption rights on transfer of shares

• good leaver/bad leaver cl’s

• drag along/tag along cl’s

• any ratchet cl’s

Finance/Debt docs, banking docs

• parties for Loan ag - Bank and N2

• parties for sec docs and guarantees: Bank, N1 and 2, T

• intragroup loan ag: N1 and 2

• Bank is likely to provide a large loan to N2 to help purchase T shares or business

• Bank will want security over assets of N2, N1, T and any subs

• following docs will need to put in place”

• facility ag - setting out total amount being advance to N2 w/default provisons and covs (including requirements that N2 provide info to Bank @ agreed times and requirements that N2 meet certain tests thr/o duration of facility)

• Security docs: N2 will give a debenture in favour of Bank to secure borrowings. N1, T and any T subs likely to have to give a guarantee and debenture in favour of the Bank also to secure N2’s loan. Pre-Oct 2008, this required whitewashing under old CA to allow giving of security for such financial assistance purposes

s.323 CA

• appointing corp representative via BR - allows Co A (ie. N1) who is a s’er of Co B (ie. N2) to authorise a person (often a Co A d’or) to act as its representative s’er @ Co B meetings

• only relevant for corporate s’ers - list BR in BMs if made

Present

Written res’s

• remember voting method - it isn’t on a show of hands on those present so the actual threshold in % needs to be met.

• Nb. on fact patterns if people are away/d’ors on holiday

Relevant forms for assignment

• separate deeds of Assignment (eg. IP rights, contracts)

• TR1 for any properties

• Stock Transfer Forms for any shares

Main docs needed for equity transaction on MBO

• IA

• DL

• Acq Agreement

• Service contracts (as M are buying equity from N1)

Main docs needed for acquisition

• Acq Ag

• together w/DL (for acq ag (from S to B)

• ancillary acq docs

Tax

• Stamp duty in respect of any shares w/in 30 day deadline @ rate of 0.5% of cons apportioned to them. As this is a business sale, total cons will have to be apportioned between different assets being sold

• SDLT - complete a Land Transaction Return form and pay SDLT for any properties transferred w/in 30 days. If a property is owned by a sub which is being sold via a share, no SDLT required as no transfer of ownership

Co’s House Filings and Co Books updating

• Forms AP01 and AP03 notifying appointment of d’ors and secretary for Newcos 1 and 2 (if not already done) and 2 x form AP01 notifying appointment of i d’ors of N1

• Form 287 notifying change of reg’d office (N1 and 2)

• Form 225 notifying change of accounting ref date (N1 and 2)

• Form SH01 Return of Allotments (N1)

• WRs on change of name x 2 (N1 and 2) plus fees (nb. S’s solictiors will file the T WR)

• WR adopting new Arts plus a print of new arts (N1)

• Update N1’s register of d’ors to show appointment of i d’ors

• Update T’s Register of Members to show transfer to N2

• Update charges register of T, N1 and 2 to show security given to bank

E’ees

• Hold meeting w/e’ees to reassure them and to deal w/any e’ee related concerns or issues. The informing (and if necessary consulting) process must have taken place before the transfer in order for it to comply w/TUPE. It is however, a sensible suggestion to meet w/e’ees or their representatives post-compl to deal w/any outstanding e’ee related issues

• send out formal notices w/details of new e’er

Data Protection

• As there will a transfer of data on business sale, the parties will be under an obligation to inform all data subjects (eg. e’ees) that a new data controller is now holding personal data and in practice it is normally the B who will do this