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BLP > 8. Acquisitions > Flashcards

8. Acquisitions Flashcards

1
Q

What forces S to make appropriate disclosures on warranties

A

Need to qualify warranties

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2
Q

What is a tax covenant

A

Indemnifying B for tax liability arising before completion

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3
Q

What will B also negotiate under confidentiality agreement

A

mutual confidentiality undertaking

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4
Q

Why do employees transfer automatically under business sale

A

TUPE

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5
Q

Who sends DDQ

A

Buyer

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6
Q

Why is SS simpler

A

Only transfer 1 asset

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7
Q

What is the usual procedure for exchange and completion

A

Simultaneous

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8
Q

When might exchange and completion not be simultaneous

A

If there are conditions precedent

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9
Q

Pros of business sale for S

A

Sell loss-making business

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10
Q

What is the only possible acquisition for Ps and STs

A

Business sale (as no shares)

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11
Q

Two kinds of acquisition

A

Share sale and business sale

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12
Q

What is the basis between warrantors if warranty breached

A

J&S

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13
Q

What is the cause of action if warranty breached

A

BoW + damages

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14
Q

Are HoTs usually legally binding?

A

No only moral force

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15
Q

When might HoA be agreed

A

Always before contracts, but maybe even before lawyers involved

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16
Q

What transfers automatically under business sale

A

Employees through TUPE

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17
Q

What does the DDQ allow B to do

A

Make fully informed coice

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18
Q

What might lawyer advise as a result of DDQ

A

Price reduction

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19
Q

When are warranties given by S to B (at what point in the transaction)

A

At completion

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20
Q

Two ways S can qualify warranties given

A

Specifically or generally

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21
Q

What determines the extent of the DDQ

A

Type of acquisition, instructions, budget, price and assets being bought

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22
Q

Cons of business sale for B

A

Disruptive; need 3rd party consents; more complex as need separate transfer of all assets

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23
Q

When are indemnities less likely (kind of acquisition)

A

Business sale

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24
Q

Where does S qualify warranties given

A

In Disclosure Letter

25
Q

Cons of share sale for buyer

A

More time/costs on due diligence due to liabilities + negotiating W/I; take company as it is

26
Q

What can B try to agree with S in case of S’s BoW

A

Escrow for part of purchase price to cover any BoW claim, to be released when period ends

27
Q

When might S and B get tax advantages - kind of acquisition

A

Share sale

28
Q

Why is assignment easier to move contracts in business sale

A

Bipartite instead of tripartite

29
Q

What two clauses in HoT are usually expressly legally binding

A

Lock-out agreement and confidentiality clause

30
Q

What is a business sale

A

Sale of part of company (a business) as a going concern

31
Q

Why must Target Ds approve share sale (MA)

A

MA 26

32
Q

What do responses to DDQ highlight for B

A

Areas of concern

33
Q

Who prefers business sale

A

Buyer

34
Q

What does a lock-out agreement ensure

A

No competition for sale, reducing wasted costs and time in due diligence

35
Q

What document qualifies S’s warranties

A

Disclosure Letter

36
Q

Pros of share sale for B

A

No need for 3rd party consent, continuity and simpler

37
Q

What document in share sale or business sale includes protection provisions for S

A

(Draft) Acquisition Agreement

38
Q

Which assets of business transfer w/ business sale

A

Those chosen and listen

39
Q

How long does confidentiality agreement usually last

A

Indefinitely

40
Q

Why must M reg be updated in share sale

A

New Ms as shares sold

41
Q

What PCR issue is necessary to keep in mind when acquiring another company

A

No illegal FA being given under 678/679

42
Q

Cons of business sale for S

A

Unable to transfer undesirable parts; consideration only gets to Ms on winding up/dividend

43
Q

Who prefers share sale

A

Seller

44
Q

Pros of business sale for B

A

Cherry pick assets + liabilities

45
Q

How does consideration get to Ms on share sale

A

Directly to Ms

46
Q

When is the disclosure bundle prepared and by who

A

S’s lawyers, when disclosure letter drafted

47
Q

What kind of indemnity will not be applicable to business sale

A

Tax covenant

48
Q

Why might S prefer business sale

A

Wants to keep operating other parts of company

49
Q

MA 26 provides for what

A

Target Ds must approve share sale

50
Q

Why no need for 3rd party consent on SS

A

No change of party to the contracts/owner of assets

51
Q

Pros of share sale for S

A

Clean break + consideration straight to Ms of company

52
Q

Two examples of headings in DDQ

A

Licences/Consents, Trading/Contracts

53
Q

Two ways to value a company

A

Book value of assets or valued as a going concern

54
Q

Procedure for Share sale

A

STF –> B pays SD –> Target Ds approve –> Update M Reg

55
Q

How does consideration get to Ms on business sale

A

Winding up/dividend

56
Q

Why is there no determinative way to value a company

A

All are subjective

57
Q

Two ways to move contracts in business sale

A

Assignment or novation

58
Q

What S protection provisions might be included in Acquisition Agreement

A

Financial limit of liability and time limit for claim (shorter than 6 at common law)

59
Q

Three ways S might try to reduce liability to B when giving indemnities and warranties

A

De minimis, de maximis caps and time limit in which claim to be brought

BLP (18 decks)

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