Commercial Facts

Question 1

If one company buying another company for $500mil and it transpires that the target company is being sued for potentially $50mil what can the buyer do

Answer 1

1. Walk away - but if want to go ahead with deal not viable option
2. negotiate and reduce purchase price - seller likely refuse as outcome is uncertain and may not end up paying anything
3. request indemnity - pound for pound compensation for anything paid out in relation to this claim post-acquisition - likely go in contract, but does not protect buyer if seller goes insolvent
4. conditions precedent - deal does not go through until claim resolved - not viable as resolving is not within parties’ control - claimant may have own personal motivations and unwilling to settle before court - massive delays
5. correct answer -> putting the $50mil into an escrow account (neutral bank account precided over by solicitor) this way buyer protected if S insolvent and seller protected if case gets thrown out, if case goes to court parties can split the difference -> fairest and most secure option

Question 2

How firm can help if international hotel chain looking to buy famous London hotel (Corporate sector)?

Answer 2

1. getting client onboard - carry out KYC checks (money laundering) and engagement letter (key terms governing relationship between client and lawyer)
2. due diligence - red flagging issues to various teams
   a. Ownership structure of seller and target company: Does seller have right to sell? Does target company have the right to own?
   b. Commercial contracts

Question 3

How firm can help if international hotel chain looking to buy famous London hotel (real estate)

Answer 3

1. who owns the property?
2. do they have the right to sell?
3. is it freehold/ subject to a lease?
4. 3P rights affecting the property
   a. easement
   b. restrictive covenants
   c. subject to security
5. Did seller comply with property requirements in the past?
   a. if did building work before - did they have planning permission?
   b. did they have building regulation clearance?
   c. if not, need indemnity/ draft specific contractual protections in case of being sued by local authority
6. Intended use of buyer? is this allowed under the terms of the lease if it is held by leasehold

Question 4

How firm can help if international hotel chain looking to buy famous London hotel (IP)

Answer 4

If buying Ritz - key IP: name and the trademark “Ritz” - ideally the exclusive right

Look to ensure target asset owns IP rights - might discover seller owns the IP right - so if just buy asset, seller may retain IP right -> need to negotiate trademark of Ritz/ other IP right so seller cannot set up another Ritz elsewhere

Check Patents: technology -> incredibly important aspect of technology company e.g. Apple/ Dyson

Check IP clauses in supplier contracts to ensure target company has not accidentally given up some of its IP - common early stage biz to sign agreement with suppliers - stating any IP created during rs owned by the supplier

Question 5

How firm can help if international hotel chain looking to buy famous London hotel (Finance)

Answer 5

Review existing:
financial arrangements involving seller and target biz - ensure target biz does not owe a lot of money/ will be paid off before deal

Security arrangements - ensure what you are buying not subject to serious restrictions
If there is onerous security - try ensure seller pays off relevant lender so security is discharged before deal goes ahead

Facilitate financing of deal
a. Help structure deal figure out where money come from
b. Draft and nego finance doc: facility agreement including loans etc.

Tend to work closely with private equity teams - as involve both investment and debt to fund acquisition

Question 6

How firm can help if international hotel chain looking to buy famous London hotel (Employment, pensions and benefits)

Answer 6

1. Employment due diligence:
   Compliance with employment law
   Outstanding claims from employees
   Policies aligning with regulatory requirements
2. Review contracts with key employees
   Not worth cost to review all
   Key managers involved in managing hotel to success
   Look to:
   a. Change of control clauses: might say key employer can resign with no notice if hotel acquired
   b. Non-compete provisions: ensure CEO or head cannot quit immediately due to change of control clause and set up competing hotel

If they exist - what can the buyer do?
1. Talk to employees in advance and see if you can get them to waive those rights in event of acquisition
2. if they can agree - need some form of incentive:
sign on bonus/ bonus tied to targets e.g. growing revenue
Offer equity - every year you stay, get equity = equity incentivisation vested over time rather than upfront - share option

3. Pensions team (complicated area, mention briefly): might check if there is pension scheme deficit
   Companies having to pay certain amount of money into pension scheme every year to ensure enough money to pay pensions of retired employees
   If company behind on this and big gaping deficit of pension scheme -> huge liability buyer taking on

Question 7

How firm can help if international hotel chain looking to buy famous London hotel (Competition)

Answer 7

Analyse likelihood of deal being blocked by regulator - will be blocked if “substantially lessens competition”

Q: If competition team believes there will be a competition issue… how could parties deal with that -> parties could negotiate with regulator… will you let me buy this biz, if before buying it
the seller sells certain part of biz to another company
Or seller does not sell certain entities within that group that cause competition issues
Or promise within 1 year of acquisition closing - will sell parts of biz concerning the regulators

Question 8

How firm can help if international hotel chain looking to buy famous London hotel (Tax)

Answer 8

Advise on how to structure the transaction most tax-efficiently
Consider how deal financed and buying asset e.g. share sale or asset sale
Look to how financing might be structured

Conduct Due diligence to check for pre-existing tax liabilities as it could become buyer’s problem

Question 9

How firm can help if international hotel chain looking to buy famous London hotel (Dispute Resolution)

Answer 9

1. assess circumstance
2. quantify liabilities
3. propose solutions

Question 10

Risks of litigation

Answer 10

1. unpredictable, costly and time consuming
2. impact on reputation (esp when public figure involved) - court cases are public, attract media attention
3. consider potential permanent breakdown within relationship between contracting parties
   a. consider importance of the relationship
   b. are there alternative replacements to the contracting party? or elements of the contracts?

Question 11

Proving a litigation claim

Answer 11

1. was there a written contract between parties ?
   YES:
   a. is there a copy?
   b. what were the terms?
   c. what exclusions were in the contract? exclusions from liability?

NO:
A. what were terms of agreement?
b. what basis did the parties maintain those were the terms?

2. what other documents needed to support claim?
   a. are there those that might adversely affect claim/ contradict it
   b. will claimant’s partners provide witness evidence to back claim

Question 12

Funding litigation

Answer 12

pursuing is costly -> so how to fund the claim?
1. claimant by themselves?
2. claimant’s firm consider no-win-no-fee (conditional fee arrangement) pricing structure

3. will the cost of bringing the claim outweigh any damages recovered

Question 13

Litigation - ADV & DISADV

Answer 13

ADV:
1. A could sue B in respect of alleged claim
2. both parties need to follow legal processes in lead up to claim -> both present argument and hope judge find in their favour
a. could result in judge ordering B to pay damages, (but no guarantee A would win case)

3. Note: many litigation processes do not end up proceeding to trial -> parties deciding to settle dispute outside court
   a. Initiating litigating proceedings could be strategic to encourage other party to settle - settling early is advantageous:
4. reduce parties’ legal fees
5. allow management teams to focus on running biz
6. decrease risk of biz incurring reputational harm following public court hearings

DISADV:
1. costly
2. time consuming
3. distracting to biz
4. damaging to company’s reputation
5. losing P may have to pay some of other P’s legal costs -> significant financial risk
6. contract between Ps might include clause stipulating they have to first try ADR methods before progressing to claims through court

Question 14

Types of ADR (alternative dispute resolution) methods

Answer 14

1. open discussions between parties - parties engage in open discussions to understand eacb POV and make concessions where appropriate
   a. cheapest and simplest way
   b. but if already instructed to help resolve dispute - Ps unable to resolve themselves, likely not feasible option
2. mediation
   - conducted confidentially
   - Ps nominate neutral 3P (facilitator) to assist them in achieving mutually beneficial arrangement
   - Ps remain in control of decision
   - facilitator not decision-maker, just help Ps examine problem
3. Arbitration
   - impartial arbitrator nominated - could be expert in field
   - decisions final and binding
   - more contentious and adversarial
4. Expert determination
   - Ps appoint independent expert in subject matter of dispute

Question 15

Open discussions - Adv and disadv

Answer 15

a. cheapest and simplest way
b. but if already instructed to help resolve dispute - Ps unable to resolve themselves, likely not feasible option

Question 16

Mediation ADV and disadv

Answer 16

ADV:
1. cheap and relatively quick
2. preserve relationship - informal nature and focus on cooperation
3. confidentiality - no court involvement
4. discussions held throughout mediation not admissible in court if mediation fails and Ps proceed to trial

DISADV:
1. Solutions from mediation do not provide precedent for future disputes -> does not prevent/ contribute to resolution of future disputes
2. only effective if both P genuinely intend to resolve out of court
3. if case inv complex legal/ factual issues - not appropriate
4. no guarantee Ps will find solution - could waste time and money

Question 17

Arbitration adv and disadv

Answer 17

ADV
1. Confidentiality
2. final and binding solution
3. Ps can choose arbitrators, and to some extent the rules governing the procedure (in adherance to the Civil Procedure Rules) -> flexibility

DISADV:
1. adversarial - strain biz rs as not focused on finding compromise
2. no precedent
3. unlike litigation, no power to add 3Ps to dispute unless Ps agree

Question 18

Expert determination - adv and disadv

Answer 18

adv:
1. private, quicker, cheaper than litigation

disadv:
1. ps can agree in advance to be legally bound by expert decision - but if they do not, no guarantee dispute resolved wasting money and time

Question 19

Company seeking to enter new market in different jurisdiction - 4 key considerations

Answer 19

Company
Product
Customers
Competitors/ Market

Question 20

Company seeking to enter new market in different jurisdiction - Company considerations

Answer 20

1. consider client’s current financial situation
   a. entering new market costly venture
   b. check firm enjoiny healthy profits
   c. check debts - if too much, unable to secure additional finance to fund venture
2. Firm’s key strengths and weaknesses
3. Firm’s unique selling points

Question 21

Company seeking to enter new market in different jurisdiction - Product consideration

Answer 21

1. in what way is client’s product superior to other products available in the market, both in original country and new country
2. what stage of the product life cycle are the client’s products?
3. what is the market like for the client’s product?

Question 22

Company seeking to enter new market in different jurisdiction - Customers consideration

Answer 22

1. key customer segments in client’s market? what are the sizes of each segment? how do these segments compare with customer segments in the same market in the new country?
2. are the client’s customers price-sensitive? will this be the case in the new country? could client offer prices lower/ equal to those charged by competitors?

Question 23

Company seeking to enter new market in different jurisdiction - Competitors/ market consideration

Answer 23

1. growth rates of client’s product/ alternative products ?
2. key players in the new market and their respective market shares?
   a. if direct competitors part of fragmented market vs. well-established big entity ?
3. legal environment in Kuwait?
   a. are there strong patent laws ?

Question 24

if high net worth indv seeking to set up football league -> methods of financing

Answer 24

1. cash reserves - indv may lack sufficient cash
2. corporate financing - borrowing
   a. risky due to mandatory repayments
   b. lack sufficient assets to offer as security
3. capital markets - IPO / sell bonds/ shares
   a. may lack sufficient profile to guarantee demans
4. external investment = best option if indv has good biz plan and track record
   a. angel investor
   b. venture capital firm

Question 25

ADV AND DISADV OF IPO

Answer 25

ADV:
1. improve credibility since regularly update financial info and also complying with stringent rules

2. wider investor pool - increase capital
3. banks lend on more favourable terms/ suppliers

DISADV:
1. volatility of market e.g. Deliveroo IPO -

2. prestige puts you in spotlight - more scrutiny by consumers and regulators
3. transparency involved - publish financial info regularly -

Question 26

Warranty

Answer 26

contractual statement of fact and assurance about specific condition (matters of QUALITY)
e.g. profitability of target company -> damages calculated by (market value of the company if warranty true - actual market value)

if breached -> damage to put party in position if warranty true

Question 27

Indemnities

Answer 27

promise to reimburse C in respect of loss suffered (matters that are SPECIFIC AND KNOWN) and fall out of buyer’s responsibility
e.g. litigation risk, product liability, tax liability

Question 28

Share purchase agreement considerations when company consists of multiple shareholders

Answer 28

1. drag along right -> if purchaser wants sole ownership, this right allows majority shareholders to drag minority to sell shares at same conditions offered to majority
2. tag along right -> if majority sells their shares, minority have right to sell at same consditions
3. right of first refusal - obligations of shareholder to first offer stake to existing shareholders before selling to 3p, enables existing shareholder to buy at same conditions as 3P

Question 29

How to avoid becoming insolvent

Answer 29

1. renegotiate terms of loans with creditors to extend repayment time
2. raise additional finance - issue new shares if demand exists
3. mintor profitabiltiy and improve cash flow - cost cutting, review company plans, find cheaper suppliers or extend credit periods with existing suppliers, effective collection. of customer debts -
4. consult turnaround specialists

Question 30

Exporting adv and disadv

Answer 30

adv
1. expand operations without committing to direct investment in another country - lower risk and cost

disdadv;
1. currency value fluctu
2. taxes? - may hinder cost cotrol
3. distribution costs
4. may lack relevant biz knowledge of market/ access to resources

Question 31

franchising

Answer 31

adv: do not need to fund expansion and increase customer base

disadv: cannot exert control over how franchise ran - damage rep

Question 32

licensing = when biz (licensor) permits another (licensee) to use an element of its biz (e.g. iP rights) in exchange for a royalty

Answer 32

adv: if biz lacks capabilities but developed relevant tech, licensing could provide source of revenue

disadv: if tech embedded into another product, biz may lack customer loyalty/ brand recog, risk licensee expropriate tech and emerge as competitor

Question 33

risks of entering joint venture

Answer 33

1. risk of failure - liability for other’s mistakes
2. incompatability of goals

Question 34

How to value target company

Answer 34

1. default values = assets - liabilities
2. comparable analysis of similar biz being sold
3. combined value = benefit of EOS/ complementary resources/ supply chain integration
4. future potential - overpaying now as later worth it
   OR discounted cash flow analysis 0- taking into account risk, opp cost, and inflation
5. market growth/ industry trends
6. multiple of profits

Question 35

Earn-out provision

Answer 35

entitle seller to further consideration following sale, depending on target’s future performance

Seller unlikely to accept unless can continue to exert some level of influence over target’s performance -> propose shares?

Question 36

strategies of private equity firms to increase value of high growth potential company

Answer 36

1. improve operational efficiencies
   cutting cost
   improved synergies and EOS
   divesting less profitable elements of biz
   improving cash flow
   bolt-on acquisition

Question 37

BUYER PROTECTION

Answer 37

1. due diligence
2. warranties/ indemnities to protect buyer from issues
   - ask Seller to fix/ undertake certain issues before deal completes
   - demand indemnities for liabilities exposed
3. IF seller discloses issues -> negotiate indemnity (unquantifiable costs)/ reduction in price (quantifiable costs) to compensate for this issue

Question 38

Seller PROTECTION

Answer 38

1. disclose issues so buyer not entitled to sue under warranty
2. negotiate liability caps ->
   a. de minimis clause -> cannot bring claim unless worth at specified min amount
   b. de maximis cap: cap on max amount that can be claimed for particular breaches
   c. Aggregate basket of claims: no payment unless aggregate losses exceed agreed amount -> prevents repeated payents of proportionally small claims -> once agreement threshold reached:
   either a. tippingbasket -> total value of losses
   b. deductible: only liable for losses arising in excess of agreed threshold

Question 39

Non-solicitation clause

Answer 39

Buyers may require seller to sign Non-solicitation clause:
To mitigate risk of sellers luring key contributors away from the company post-acquisition

Question 40

IF outstanding litigation: if pending litigation settled post-acquisition, purchaser would be liable to pay any damages

Answer 40

essential for purchaser to secure an indemnity from seller against any costs that may later arise

or undertaking that on-going litigation will be settled before acquisition completed

Also covers any litigation that is not pending, but arises in future as result of target’s activities pre-acquisition

Question 41

Debt

Answer 41

Purchaser could req warranty that no undisclosed debt exists

Company must continue to make coupon payments to bondholders and will eventually have to repay the original price of the bonds i.e. the principal amount

Question 42

share sale adv and disadv

Answer 42

adv
1. gain full control over company - tangible and intangible, assets
2. more likely to result in biz continuity post-acquisition - all resources needed to operate in place already

disadv
1. shareholders - difficult to convince majority to agree to sale
2. take on existing liabilities and obligations

Question 43

asset sale adv and disadv

Answer 43

adv
1. cherry pick assets
2. less subjective valuation as no need to consider intangible assets
3. quicker and easier due diligence
4. lower risk of taking on unforeseen liabilities - only those linked to the asset
5. UK tax law offsets market value of assets against tax

disadv
1. no benefit of employees/ internal knowledge/ process
2. seller may refuse because want clean break

Question 44

adv and disadv cash financing

Answer 44

1. retain full ownership and control of assets
2. no interest payments - no obligation to repay
3. quicker and cheaper to arrange

may lack sufficient cash reserves

Question 45

when seeking to raise debt to finance a deal - lender considers bORROWERS

Answer 45

1,CREDIT RATING
TRACK RECORD
PREVIOUS RS WITH LENDERS
BIZ PLANS
ABILITY TO OFFER COLLATERAL/SECURITY

Question 46

ADV ANDD DISADV OF LOANS

Answer 46

1. guaranteed access to funds - lump sum/ tranches

obligation to repau
risk of insolvency
security
repayable on demand

Question 47

Bonds

Answer 47

Company issues debt instruments (bonds) to investors through debt capital market in exchange for cash
Bond issued
Regular coupon payments
Bond matures -> lump sum payment of initial investment

Question 48

Condition precedent -

Answer 48

conditions that need to be fulfilled or contravt will not be valid
- important for regulation clearance

Exampls: if biz wants to buy target company because of its strong IP
1. assess whether target company owns their IP rights
IF NOT - include condition precedent stipulating target company to obtain IP from 3P for acquisition to go ahead

Question 49

Stages of contract

Answer 49

1. offer
2. acceptance
3. consideration
4. intention

Question 50

How a minority shareholder might be protected from a majority shareholder

Answer 50

enhance minority shareholder rights via shareholder’s agreements to include
1. rights to block major decisions
2. protection from their shares being diluted
3. access to info regarding the company’s affairs
4. board representation
5. mechanisms to exit the company

Question 51

Minimising cost strategies x6

Answer 51

1. Maximising EOS
   a. cost advantage when fixed costs remain the same but output increase and costs decrease
   b. eg. bulk buying - supplier willing to offer lower price
2. integrating into supply chain
   a. taking control of multiple stages in supply chain e.g. acquiring its suppliers avoid paying additional profit margin
3. outsourcing
   a. contracting various processes to specialised external companies
   - cut cost by outsourcing to companies in jurisdictions with lower wages and costs
   - benefitting from expertise not available in-house
   - flexible staffing options -> may be easier to stop working with 3P staff than making employees redundant
4. offshoring
   a. shifting biz process to countries where costs lower
5. entering into long-term contracts
   a. control and more accurately predict future costs
   b. may get more favourable rates
6. utilising derivatives
   a. e.g. futures agreement: involve parties agreeing to engage in transaction agreed date in future at specified price
   b. e.g. options agreement: give party a right to purchase/ sell product in future at specific price
   c. this hedges risk and facilitates more accurate financial planning

Question 52

How to grow a business organically/ internally growth x6 ways

Answer 52

1. effective marketing
2. expanding biz presence on existing markets e.g. opening new stores / e-commerce
3. entering new markets e.g. exporting to other jurisdictions
4. diversifying range of products and services
5. licensing aspects of biz to other organisations
6. franchising biz

Question 53

adv and disadv of organically / internal growth of a biz

Answer 53

adv
1. reduced risk
a. dependent on increase in demand rather than estimates and projection of potential returns from e.g. an acquisition

2. easier integration
   a. retaining culture, protect brand, maintain effective cmmunication

disadv
1. slower expansion

2. expensive to enter new jurisdiction - require extensive marketing and investment in new supply chains
3. increased risk of breaking into new markets if more established competitors exist

Question 54

Joint venture

Answer 54

2 or more biz agree to pool resources and work together

exist as two sep entities - companies have separate motivations and drivers and reasons for entering the joint venture

share costs, risk and rewards
- gaining e.g. 1) assets; 2) supply chain and distribution network; 3) IP rights

synergies - sharing resources to reduce cost/ knowledge and expertise

Question 55

risk of entering a joint venture

Answer 55

1. liability for other biz’s mistakes
2. incompatibility of goals

Question 56

advantages of acquisitive/ external growth x 7

Answer 56

1. rapid expansion - growth from deal
2. access to expertise and complementary resources (financial, physical, technical) -> boost capabilities
3. EOS -> reduced costs
   a. negotiate more favourable price with suppliers by bulk buying
   b. making duplicate employees redundant
   c. selling duplicate real estate e.g. 2 head offices - combine into one
   d. better utilise existing resources - manufacture new broader range of products ensuring factories at full capacity
   e. if acquisition inv integrating into supply chain - reduce costs
4. geographical expansion if acquired biz in another jurisdiction
   a. gain in-depth understanding of local market + supply chain rs
   b. immediate and effective expansion vs. learning about market from afar
5. diversification of product/ service range
   a. attract new customers + generate additional sales from existing ones
6. reputation
7. reducing competition in the market by increased market share and purchasing power

Question 57

disadv of acquisitive/ external growth x3

Answer 57

1. expensive
   - especially if target company’s shareholder demand a premium (higher price than market value)

2.time consuming due diligence

3. complex - difficult to integrate 2 separate biz operationally + culturally and maintaining internal communication

Question 58

M&a process

Answer 58

1.Pitch
Law firms pitch to clients to be selected as legal advisor for transaction

2. Internal/ external checks
   a. must check not engaging in work that may give rise to conflict of interest
   b. KYC checks so no risk of illegal activities
3. Initial Instructions
   Ascertain client’s primary objectives and agree on a fee structure and approx timetable for execution of proposed transaction
4. Resourcing
   Coordinating different practice areas internally to source specialist advice
   Engaging and coordinating external parties e.g. local counsel/ other 3P advisers
5. Auction process or bilateral sale
   A. Auction process:
   - involves multiple bidders competing to buy a target company
   - Sellers typically select their preferred bidder based on price willing to pay and terms willing to agree/ concede
   b. Bilateral sale:
   sale process involving a seller and only one prospective buyer
   ADV: no other prospective buyers in picture - lower likelihood of competitive tension pushing up purchase price
6. Buyer protection
   - To determine what price to offer and terms to request - prospective buyer carry out due diligence to gain insight into company’s value and ascertain if need contractual protections in place if deal goes through
   - Buyer may want seller to sign exclusivity agreement: party agreeing to contract
7. Deal execution

Question 59

Private equity firms

Answer 59

STEP 1:
invest in target biz with high growth potential and not listed on stock exchange
- may invest in public companies with intention of taking them private (e.g. buying all shares of public company)

pool money from external investors i.e. a fund -> use the fund and money borrowed from lenders to finance their acquisition / investment

Typically invest in established biz that are
1. underperforming (e.g. because of operational inefficiencies) or
2. undervalued

Step 2:
Work with biz and its management team to increase the value of the company - over period of time (3-7 yrs)

Step 3: selling biz with hope for sig profit

Question 60

Strategies by private equity firms to increase the value of the biz they invested in x 7

Answer 60

1. Improve operational efficiencies
2. Cutting cost
3. Improved synergies and Eos
4. Driving greater revenue
5. Divesting i.e. selling/ shutting down non-core less profitable elements of the biz
6. Improving capital and cash flow
7. “bolt on” acquisitions:
   Buying smaller: complementary biz / competitors and integrated into simple larger corporate group -> sold for much greater profit as combined entity more valuable than the sum of its indv parts
   Usually smaller acquisition - so less risky
   These are usually synergistic (i.e. both companies benefit from the transaction)

Question 61

Seller protection - negotiation caps on liability

Answer 61

1. De minimis clause: restrict ability of injured party to bring claim unless worth at minimum specified amount - prevent trivial claims
2. De maximis cap: cap on max amount that can be claimed for particular breaches
3. Aggregate basket of claims: P who gave indemnity will not have to pay out until the other party’s aggregate losses exceed an agreed amount – prevents repeated payments of proportionately small claims
   -> once the agreed threshold is reached, either…
   a. Tipping basket: pay total value of losses
   b. Deductible: only liable for losses that arise in excess of agreed threshold

Question 62

due diligence on assets x 5

Answer 62

ascertain which assets included in a deal

Whether seller has a legal right to sell assets in question

Whether assets subject to charges/ restrictions e.g. mortgage/ right of usage granted to 3P - easement)

Whether assets in satisfactory condition

Liquidity of assets

Question 63

due diligence on liabilities

Answer 63

1. Outstanding litigation: if pending litigation settled post-acquisition, purchaser would be liable to pay any damages
   a. essential for purchaser to secure an indemnity from seller against any costs that may later arise
   b. or undertaking that on-going litigation will be settled before acquisition completed
   c. Also covers any litigation that is not pending, but arises in future as result of target’s activities pre-acquisition
2. Debt: including outstanding loans, unpaid overdrafts, payments owed and bonds that have been issued and have not yet matured
   a. Company must continue to make coupon payments to bondholders and will eventually have to repay the original price of the bonds i.e. the principal amount
   b. Purchaser could req warranty that no undisclosed debt exists
3. Pension scheme liability: purchasers will be liable for future pension payments that company obligated to make
   Check whether target has enough capital to fulfil these liabilities
   Request warranty regarding state of company’s pension scheme

Question 64

Financing a deal: Raising capital for an EARLY STAGE BIZ

Answer 64

Using savings/ cash reserves
Borrow from or sell equity to friends and family
Rely on small loans (e.g. overdrafts and credit cards)

Question 65

Financing a deal: Raising capital for a SCALE-UP BIZ

Answer 65

1. Angel investors - high net worth indv - tend to offer mentorship and advice
2. If need more money than angel investors: venture capital firms
3. If already generating revenue, and confident can repay loan -> larger biz loans

Question 66

Financing a deal: Raising capital for a MATURE BIZ

Answer 66

1. Syndicated loan: pool of lender sharing risk and reward
2. Capital markets to raise capital - by way of issuing bonds or selling shares to the public