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LPC Law Notes Private Acquisitions Notes

Early Stages Share Sale Notes

Updated Early Stages Share Sale Notes

Private Acquisitions Notes

Private Acquisitions

Approximately 339 pages

A collection of the best Mergers and Acquisitions* notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short, these are what we believe to be the strongest set of Mergers and Acquisitions notes available in the UK this year. This collection is f...

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The following is a more accessible plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Share sale

Asset sale
only asset changing hands are shares in co all individuals assets transferred - B can cherry pick which
B acquires T w/all its assets and liabilities B can carry on business in succession to S
to outside world nothing has changed As part of acq, B automatically assumes some liabilities (eg TUPE) however can cherrypick and most liabilities remain w/S
Cons is exchanged for shares in T Cons is exchanged for assets of T

Early Stages

Stages of a transaction in overview

Concerns:

Buyer

Seller

knowing T is:

  1. a worthwhile acq

  2. that it is worth consideration being paid

knowing S is:

  1. seriously committed to selling T @ price B wants to pay

  2. not currently engaged in negotiations w/1 or more potential Bs

as process is v spenny

  1. obtains best possible price for T; but

  2. that commercial integrity of T is not compromised as a result of aborted sale

2 x types of sale considered on PA:

  1. Private Treaty Sale ‘PTS’ - where S negotiates w/one B

  2. Auction Sale ‘AS’ - where S negotiates w/several competing Bs

How does the S go about meeting B’s concerns on a sale?

Private Treaty Sale

Auction Sale

Both

  • heads of agreement

  • exclusivity/lock-out agreement = agreement that for a certain period of time S won’t speak to any other Bs

  • process letters

  • indicative bids (equivalent of heads of ag)

 - confidentiality agreements

Preliminary stages: meeting concerns, break fees [if applicable], DD [legal, financial and commercial]

Auction sales:

Ads for S

  • S usually reach more Bs thr/AS

  • competitive tendering can increase prices

  • process enables S to obtain better sale terms than on PTS

  • S can use data room to control amount of docs disclosed and limited investigation permitted ot Ss

  • S has opportunity to control timetable, esp to reduce time it takes to proceed from agreement in principle to completion

  • a well market auction can enable d’ors to demonstrate to s’ers and c’ors that they have obtained best price for T

Disads for S

  • not all business are suitable for sale by auction

  • an auction may also be inapprope where the structure of buiness is particularly complicated or where there are significant external factors

  • the cost to S is usually higher than on a PTS

  • the knowledge that a T is for sale can interrupt the normal course of business

  • Management (‘M’) may need to spend more time on sale than business - potentially damaging

  • process of negotiating w/more than 1 bidder imposes additional stresses on S and M of T

  • some bidders may not be serious and are only interested in finding out info re a competitor

  • if auction does not result in a sale, the failure is public and T is soiled goods

Disads for B

  • it may well be forced to pay a higher purchase price

  • its chances of success are lower than w/a PTS

  • the level of contractual protection is lower than w/a PTS

  • S can choose what info to release

  • may not reach auction floor (aka minimum price acceptable)

  • likely to receive less info re T

  • greater risk fo damage being caused to T’s business before sale

  • B has less defences than in a PTS against costs

Ads for B

  • some DD done for you

  • can obtain views from other bidders of true MV

  • you know if you’re preferred bidder

Preliminary docs

Confidentiality Agreement

  • all potential bidders in auc required to sign

  • ag’s will be drafted ito state that they are for benefit of future owners of T as well as current owner (aka S)

Process letters

  • set out procedures and timings for AS

  • will also contain information memorandum [see below]

Information Memorandum

 - contains info about T to give bidders a basis on which to make an indicative bid for T nb. no similar letter or doc on PTS

Evaluating bids

Comparing indicative bids on an AS

Nb. if you see a plc assume it’s listed unless the q tells you otherwise

Categories to consider

Points to consider

Who are likely Bs?

  • affected by competition

  • market share?

  • approvals required: s’er, investment approval, consultation w/ e’ees or e’ee representatives, operations (B’s concerns re ability of T to operate after sale), structure (individual Bs prepare a different sale structure to one proposed by S)

what is B offering to buy?

 Asset/share sale?

Amount

 consider effect of form of cons too

Form of cons?

 See also table below - generally cash preferable

how will purchase be funded?

  • consider types of cons

  • Does the co already have financing in place ie. have enough DP

  • Or is debt finance already in place? Nb. if listed a co can basically issue shares in itself to generate cash - however time/cost implications of this.

  • Will class tests because it’s a listed co delay completion?

Any other issues?

  • Does the co have conditions on NAV @ completion? How quickly can deal be put thr/? [6 wks is pretty quick]

  • If paying in LNs, when are these redeemable/how soon can S get money? [Usually 18 months to show HMRC LNs are bona fide and commercial]

  • Deal subject to any DD?

  • is any part of deal @ B’s discretion?

Basic differences between AS and PTS

Outline of PTS sale:

Seller

Buyer
take instructions take instructions

Agree

Heads of Agreement

Confidentiality Agreement

Lock-out agreement
DD Questionnaire (‘DDQ’) to S’s solicitor
Respond to DDQ Analyse response to DDQ. Advise client
Draft Acq Agreement (‘AA’)
Review draft AA. Advise client.
Mark up draft AA to include Vendor Protections Review marked up AA. Advise client.
Prepare draft Disc Letter (‘DL’) Review DL. Advise client.
Negotiate and agree AA and DL
Exchange contracts
Obtain consents/fulfill any conds
COMPLETE

Outline of AS

S

B

instruct solicitors

identify prospective Bs

consider preliminary issues

 instruct solicitors
S conducts extensive preparation, invariably using a fin advisor or investment bank
Confidentiality Agreement prepared by S and signed by B
Prepares info memorandum and process letter for prospective Bs and prepares online Data Room
Bs review...

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