Business Acquisition

There are two main ways you can structure an acquisition - acquire the assets of a business (asset purchase) or acquire the shares in the company that owns the business (share purchase). The two are fundamentally different. If you undertake a share purchase, you acquire a company with all its assets and liabilities (including some you may not know about). If you undertake an asset purchase, you just acquire specifically identified assets and assume responsibility for specifically identified liabilities.

In addition to these fundamental differences there are many other matters to consider when deciding how to structure the acquisition.

A due diligence exercise, involving the submission of a detailed questionnaire to the seller including wide ranging questions about the business, is an essential method of gaining knowledge of the target business and its strengths and weaknesses. Due diligence will also be a valuable way of assessing the level of contractual protection to be sought from the seller by way of warranties and indemnities.

The acquisition agreement is the key contractual document as it will deal with the transfer of the assets or shares, payment of the purchase price and other important issues such as warranties and indemnities and restrictive covenants (to prevent the seller competing with the business post completion of the acquisition).

Warranties and indemnities are methods that a buyer may use to recover any losses that it may incur as a result of the acquisition of the business from the seller. They are in themselves a complex topic and are commonly the issue that takes the greatest negotiation in the acquisition of a business.

Given the complexity, to ensure that your business acquisition proceeds as efficiently as possible and to ensure that the terms on which you intend to acquire the business are accurately implemented, it is essential that you take legal advice.

For further information, please contact Simon Dakin or one of the team on 0115 9 100 200 or email enquiries@actons.co.uk.