Georgie Clayton 2022©
Acquisition of Ltd Co = target
1. Structure
!/!: before being able to assess the costs and benefits of an acquisition, it is necessary to estimate the value of the Co. = see private acquisitions module for different valuation methods.
See SGS 26 pre-activity for an example of how you can be assessed on the topic of acquisitions.
The business of a Co limited by shares can be purchased:
By acquiring all of the shares in the Co: a share sale
By acquiring the business of the Co as a going concern or by acquiring a particular part of the business of the Co as a going concern: a business/ asset sale
Share sales = sellers prefer Asset sales = buyers prefer
+= +=
Seller: Buyer:
o clean break for seller who can walk away from Co, !/!: don’t forget o cherry-picking of assets/ liabilities
the negotiation of warranties/ indemnities
o liabilities will stay behind with the seller
o tax exemptions for corporate seller
Seller:
Buyer: o loss-making core-division can be sold while profitable parts of the business
o time-efficient for the buyer who doesn’t have to spend time remain
negotiating exactly what assets are to be purchased and getting
third party consents (!/!: may require attention to change of control
=
provisions)
Buyer
o disruption/ lack of continuity to business
o continuity – less disruption to the business
o each asset must be transferred separately which is more complex and
o simpler to effect as there is only one asset to transfer, i.e., the requires more documentation (time + $$)
shares and thus potentially quicker
o consents are likely to be required alerting other parties to the sale and
o tax advantages as the SD on shares may be lower than SDLT on an possibly causing further disruption and uncertainty
asset sale
Seller:
_= o can’t transfer assets/ liabilities it no longer wants to buyer unless buyer
, Georgie Clayton 2022©
Buyer: wants them
o significant time on due diligence, negotiation of
warranties/indemnities against liabilities as buyer will be acquiring
o time-consuming for the seller who spends time negotiating exactly what
all of the Co’s assets and liabilities and so will be exposed to greater
assets are to be purchased and getting third party consents if required
risk
(creditors, customers, suppliers, etc)
!/!: be careful as to vocab here – the buyer does not
acquire the liabilities, the liabilities remain with the
target; they are still of concern to the buyer though as o consideration to the selling Co which must then be passed up to SH by way
new SH (and thus owner). of dividend or winding up of remaining shell Co
What Buyer purchases the ISC (whether some or all) of a Co which are transferred via Buyer purchases whole of the business of a Co as a going concern or buys one or
STF which results in it acquiring all assets and liabilities of the target. more trading divisions as a going concern.
The target Co itself does not change but merely continues to trade as it did prior ‘Going concern’ = acquiring whole of business or large proportion of assets and
to completion but with a new owner (new SH). goodwill so that business can trade as it did prior to completion.
!/!: ST and partnerships do not have shares and as such cannot be acquired by Each asset has to be transferred separately with part of the purchase $ apportioned
sale of shares. They must be acquired by asset sale (or sale of individual assets). to it. E.g., IP assigned, property transferred (via form TR1), contracts assigned or
novated.
Ownership of the Co selling its assets (SH) does not change but the business that it
being sold changes hands. The selling Co continues to exist and if it has sold all of its
assets will now be a ‘cash shell’ with no assets except cash from sale.
Who Buyer: Seller: selling SH who can be individual, Co, Partnerships. Buyer: purchasing Seller: selling Co (not its SH!), partnership ST
purchasing Co, Co, partnership, ST
partnership, Consideration straight into hands of selling SH Consideration paid to the above which in the case of a Co
individuals results in a dividend to be declared or wound up by SH to pay
SH.
What/ How !/!: if the target has overseas operations, it’s important to ensure that overseas counsel are instructed to assist with matters such as undertaking due diligence on aspects
of the target’s business which are governed by foreign law or regulation, drafting or reviewing warranties and indemnities concerning overseas aspects, etc.
(documents)
Whether asset sale or share sale, similar documents will be required.
Which will be
determined by Focus here is on a sale by private treaty, i.e., one buyer and one seller
the client’s
Acquisition of Ltd Co = target
1. Structure
!/!: before being able to assess the costs and benefits of an acquisition, it is necessary to estimate the value of the Co. = see private acquisitions module for different valuation methods.
See SGS 26 pre-activity for an example of how you can be assessed on the topic of acquisitions.
The business of a Co limited by shares can be purchased:
By acquiring all of the shares in the Co: a share sale
By acquiring the business of the Co as a going concern or by acquiring a particular part of the business of the Co as a going concern: a business/ asset sale
Share sales = sellers prefer Asset sales = buyers prefer
+= +=
Seller: Buyer:
o clean break for seller who can walk away from Co, !/!: don’t forget o cherry-picking of assets/ liabilities
the negotiation of warranties/ indemnities
o liabilities will stay behind with the seller
o tax exemptions for corporate seller
Seller:
Buyer: o loss-making core-division can be sold while profitable parts of the business
o time-efficient for the buyer who doesn’t have to spend time remain
negotiating exactly what assets are to be purchased and getting
third party consents (!/!: may require attention to change of control
=
provisions)
Buyer
o disruption/ lack of continuity to business
o continuity – less disruption to the business
o each asset must be transferred separately which is more complex and
o simpler to effect as there is only one asset to transfer, i.e., the requires more documentation (time + $$)
shares and thus potentially quicker
o consents are likely to be required alerting other parties to the sale and
o tax advantages as the SD on shares may be lower than SDLT on an possibly causing further disruption and uncertainty
asset sale
Seller:
_= o can’t transfer assets/ liabilities it no longer wants to buyer unless buyer
, Georgie Clayton 2022©
Buyer: wants them
o significant time on due diligence, negotiation of
warranties/indemnities against liabilities as buyer will be acquiring
o time-consuming for the seller who spends time negotiating exactly what
all of the Co’s assets and liabilities and so will be exposed to greater
assets are to be purchased and getting third party consents if required
risk
(creditors, customers, suppliers, etc)
!/!: be careful as to vocab here – the buyer does not
acquire the liabilities, the liabilities remain with the
target; they are still of concern to the buyer though as o consideration to the selling Co which must then be passed up to SH by way
new SH (and thus owner). of dividend or winding up of remaining shell Co
What Buyer purchases the ISC (whether some or all) of a Co which are transferred via Buyer purchases whole of the business of a Co as a going concern or buys one or
STF which results in it acquiring all assets and liabilities of the target. more trading divisions as a going concern.
The target Co itself does not change but merely continues to trade as it did prior ‘Going concern’ = acquiring whole of business or large proportion of assets and
to completion but with a new owner (new SH). goodwill so that business can trade as it did prior to completion.
!/!: ST and partnerships do not have shares and as such cannot be acquired by Each asset has to be transferred separately with part of the purchase $ apportioned
sale of shares. They must be acquired by asset sale (or sale of individual assets). to it. E.g., IP assigned, property transferred (via form TR1), contracts assigned or
novated.
Ownership of the Co selling its assets (SH) does not change but the business that it
being sold changes hands. The selling Co continues to exist and if it has sold all of its
assets will now be a ‘cash shell’ with no assets except cash from sale.
Who Buyer: Seller: selling SH who can be individual, Co, Partnerships. Buyer: purchasing Seller: selling Co (not its SH!), partnership ST
purchasing Co, Co, partnership, ST
partnership, Consideration straight into hands of selling SH Consideration paid to the above which in the case of a Co
individuals results in a dividend to be declared or wound up by SH to pay
SH.
What/ How !/!: if the target has overseas operations, it’s important to ensure that overseas counsel are instructed to assist with matters such as undertaking due diligence on aspects
of the target’s business which are governed by foreign law or regulation, drafting or reviewing warranties and indemnities concerning overseas aspects, etc.
(documents)
Whether asset sale or share sale, similar documents will be required.
Which will be
determined by Focus here is on a sale by private treaty, i.e., one buyer and one seller
the client’s
