Private Acquisition Flashcards
You are acting for a company which is proposing to purchase all of the shares in a private limited company (‘Target’) for £20,000,000 (the ‘Acquisition’). The Target has one wholly-owned subsidiary which is a plc (‘Subsidiary’). The Acquisition will be financed by a loan from a bank. In return for the loan, the bank would like to take security from your client, the Target and the Subsidiary.
Which ONE of the following statements is CORRECT advice in connection with the security being requested from the bank?
If the Subsidiary provides security to the bank at the time of the Acquisition, it will amount to unlawful financial assistance.
(the Subsidiary is a PLC and therefore cannot give financial assistance in relation to the acquisition of shares in its parent.)
You are acting for a corporate client in relation to the acquisition of the entire issued share capital in a private limited company (‘Target’). The Target is recognised as the UK market leader in the manufacture of football goalkeeping gloves. It has a 19% share of the UK market and has an annual turnover of £4 million. Your client has an 8% share of the UK market in the manufacture and sale of football kits (including goalkeeper apparel and gloves) and has an annual turnover of £40 million. Your client also operates in France and Germany. Your client has asked for advice on any competition law issues which may arise from the proposed transaction.
Which of the following statements is correct advice in relation to the competition issues which arise on the proposed transaction?
If the proposed share sale is restructured as a business sale, the UK merger control regime would still apply to the acquisition of the business of the Target by your client.
(Potentially CMA applies where there is an acquisition of 100% of a company or a business.)
Your firm has been instructed to act for a corporate client in connection with its proposed acquisition of shares in a private limited company (‘Target’). The Target has an issued share capital of 2,000 ordinary shares of £1 each and your client is proposing to buy 1,500 of the ordinary shares in the Target (the ‘Transaction’). Your client has asked for some preliminary advice in relation to the Transaction.
What is a correct statement of advice?
When providing advice to the client in connection with the Transaction, your firm will not be carrying on an activity of a specified kind under FSMA because the shares that the client is proposing to buy in the Transaction constitute 50% or more of the voting shares in the Target.
(Advising on this kind of acquisition of shares will be excluded activity under Art. 70 of the RAO)
A public company is selling all the shares in its wholly owned subsidiary company (‘Target’) to a competitor. The Target has a number of offices in England and Wales with approximately 150 full time and part time staff. The Target offers its employees access to a defined contribution occupational pension scheme or a defined contribution personal pension scheme dependant on their seniority within the company.
Which of the following statements correctly explains the position in relation to the pension schemes offered by the Target?
Employers generally prefer defined contribution pension schemes as it means that the pension to which the employee is entitled is dependent on the value of the contributions made to the pension at the time of retirement.
Your firm is acting for a corporate client in connection with its purchase of all the shares in a private limited company (‘Target’).
The Target participates in a group final salary pension scheme (the ‘Scheme’) for the benefit of its directors, managers and staff. The Target has just received the actuarial report which has revealed that the Scheme is seriously in deficit.
Which of the following statements is the correct advice in relation to the deficit?
If the transaction is structured as a share sale, the Target may, be required to pay a proportion of the deficit in the Scheme existing at the date on which the Target leaves the Scheme.
Your firm is acting for a corporate client in connection with its purchase of all the shares in a private limited company (‘Target’) from a plc.
The Target uses a software under licence from a third-party developer (‘Developer’). Your client is keen to ensure that the Target can continue to use the software following completion.
Which of the following statements is the best advice for your client in relation to the Target’s continued use of the software following completion?
The licence should be checked for a change of control clause. If there is such a clause, your client should seek confirmation from the Developer that it does not intend to terminate the licence.
A company is acquiring a private limited company (‘Target’) from a plc (‘Seller’). The Target’s finance director has decided to resign with effect from completion of the acquisition. The finance director’s employment contract has the following clause.
‘The Director undertakes that they will not for the period of two years immediately after termination of their employment, carry on or be engaged in any business which is similar to and competes with the business carried on by the Target at the date of termination.’
Which of the following statements represents the best advice for the buyer in relation to the enforceability of the clause?
The clause is unenforceable as it the duration of two years is likely to be considered unreasonable.
A company is acquiring a private limited company (‘Target’) from a plc (‘Seller’). The parties are negotiating the acquisition agreement. The buyer’s solicitors have included the following warranty in the acquisition agreement as follows:
‘None of the employees will resign from their employment following completion’
You are acting for the seller. What is the best advice for the seller in relation to the warranty?
The Seller should refuse to give the warranty as it relates to matter outside the Seller’s control.
A company is being sold by a corporate seller and two individuals. The two individuals own 10% each of the shares in the Target and the corporate seller owns the remaining 80% of the shares. The buyer’s solicitor has included a provision in the draft acquisition agreement that the warranties are given by all the sellers on a joint and several basis. The individuals would like to minimise their liability for breach of warranty.
What is the best advice to the two individuals in respect of their liability for breach of warranty?
The individuals should enter into an express contribution agreement with the corporate seller setting out the amounts they will contribute if there is a successful warranty claim.
