Corporate Acquisitions

Question 1

general duties imposed on directors/managers

Answer 1

fiduciary duties

art 64

Question 2

difference b/w share deal and asset deal

Answer 2

share deal = buy 100% of company

asset deal = buy specific asset belonging to the company (limited risk)

Question 3

pre-contractual phase

Answer 3

1. hire advisors (financial, legal, technical…)
   - engagement letter -> initial agreement (binding)
2. letter of intent (B to A)
   - non-binding but may have potential binding provisions
3. Due diligence (investigation)
   - both buyer + vendor DD have to be on report

PRINCIPLE OF GOOD FAITH IS VERY IMPORTANT

Question 4

potential binding provisions in letter of intent (5)

Answer 4

confidentiality agreement

non-disclosure agreement (NDA)

exclusivity agreement (buyer’s interest)

who bears cost of due diligence

agree that if there is a dispute they’ll go to court

Question 5

reliance letter

Answer 5

vendor allows lawyer to access information regarding his DD reports

Question 6

checklist in due diligence (9)

Answer 6

tax (compliance, income tax…)

litigation (criminal, complaints, fines…)

corporate by-laws (company registration, minutes book…)

insurance

contracts + licenses

employment (salaries, labor agreements, work conditions…)

treatment of personal data

real estate + intellectual property

Question 7

where is the DD information stored?

Answer 7

data room

nowadays - virtual data room (VDR)

Question 8

draft SPA

Answer 8

exchange b/w both parties

important clause = representations & warranties

• disclosure schedule
• still subject to negotiation

Question 9

representations & warranties

Answer 9

clause with the guarantees/assurances that the seller is making in relation to the target company

• in favor of the buyer
• either in clause or in disclosure schedule

Question 10

what happens if misrepresentation of warranties & representations occur?

Answer 10

misrepresentations occur when reps and warranties are untrue, inaccurate or not updated

if guarantees not met or things are not disclosed = need to compensate

Question 11

relationship b/w DD and reps & warranties

Answer 11

• due diligence = allocates risk (red flags) in respect to target
• reps in SPA = must be aligned with those red flags

Question 12

signing of SPA

Answer 12

binding

‘ordinary course of business’ is continued until closing

Question 13

closing

Answer 13

upon verifications of conditions of transactions

• when payment occurs
• when change of control occurs (after transfer of shares)

Question 14

interim period

Answer 14

period b/w signing and closing of SPA

• ensuring conditions of transactions are met

(if there are no conditions, there is no interim period - signing + closing at same time)

Question 15

long stop date

Answer 15

due date for closing

• if not met, deal may be cancelled or the due date may be extended

Question 16

conditions of transactions (interim period)

Answer 16

obtaining financing

board approval

consent from regulatory authorities

consent from supplier (ownership clause) …

Question 17

ownership clause

Answer 17

when target company has pre-existing agreements w/ other parties

if there is a change of control of the target company, the agreement may be terminated by the other party

• must ask supplier for consent/waver