BESWICK AND WINE : buying and selling private companies and businesses.

557 Pages·2022·3.528 MB·English

by  SUSAN SINGLETON

Beswick and Wine:
Buying and Selling Private
Companies and Businesses

Beswick and Wine:
Buying and Selling Private
Companies and Businesses
Eleventh edition
Susan Singleton
Solicitor
BLOOMSBURY PROFESSIONAL
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First published in Great Britain 2022
Copyright © Bloomsbury Professional, 2022
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ISBN: PB: 978 1 52651 612 1
Epdf: 978 1 52651 614 5
Epub: 978 1 52651 613 8
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Contents
Preface ix
Dedication xii
About the author xiii
Abbreviations xv
Table of Statutes xvii
Table of Statutory Instruments xxiii
Table of EC Material xxvii
Table of Cases xxix
Part I The Seller’s Perspective 1
CHAPTER 1 AN OVERVIEW OF THE SALE PROCESS 3
1.1 The sale process 3
1.2 Rationale for selling 4
CHAPTER 2 ASSESSMENT OF MARKETABILITY 7
2.1 Appointment of a lead advisor 7
2.2 Preliminary review of the target 7
2.3 Appointment of the project team 8
CHAPTER 3 PREPARING FOR THE SALE 9
3.1 Planning the sale 9
3.2 Shares or assets? 11
3.3 Tax planning on the sale of shares 20
3.4 Tax planning on the sale of assets 39
3.5 Methods of sale 44
3.6 Timing of sale 45
CHAPTER 4 MARKETING 47
4.1 General 47
4.2 Preparation of the information memorandum 48
4.3 Approach to prospective purchasers 49
4.4 Confidentiality 50
4.5 Distribution of the information memorandum 56
4.6 Data rooms (off or online) 67
CHAPTER 5 NEGOTIATION PROCESS 75
5.1 Selection of the preferred purchaser 75
5.2 Negotiation process 76
5.3 Response to the purchaser’s proposals 76
5.4 Heads of agreement and exclusivity 81
5.5 Response to due diligence enquiries 83
Part II The Purchaser’s Perspective 85
CHAPTER 6 AN OVERVIEW OF THE ACQUISITION PROCESS 87
CHAPTER 7 ACQUISITION STRATEGY 91
7.1 Business objectives 91
7.2 Acquisition strategy 91
7.3 The acquisition team 92
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Contents
CHAPTER 8 THE SEARCH PROCESS 93
8.1 Identifying potential targets 93
8.2 Selecting and evaluating potential targets 93
8.3 Approaching potential targets 95
CHAPTER 9 NEGOTIATION 97
9.1 The negotiation process 97
9.2 Valuation 98
9.3 Price 100
9.4 Pricing structures 100
9.5 Financing the acquisition 104
9.6 Shares or assets? 117
9.7 Tax issues for the purchaser 137
9.8 Heads of agreement and exclusivity 138
CHAPTER 10 DUE DILIGENCE 141
10.1 Introduction 141
10.2 Matters requiring investigation 143
10.3 Forms of due diligence 207
Part III The Acquisition Agreement 215
CHAPTER 11 GENERAL PRINCIPLES 217
11.1 Introduction 217
11.2 Plain English 218
CHAPTER 12 SHARE PURCHASE 219
12.1 Share purchase agreement or offer document? 219
12.2 Share purchase agreement 222
Annex Competition and Markets Authority Mergers Guidance 273
CHAPTER 13 BUSINESS TRANSFER AGREEMENT 281
13.1 Introduction 281
13.2 Business transfer agreement 281
Part IV Post-completion 311
CHAPTER 14 ANNOUNCEMENTS AND NOTIFICATIONS 313
14.1 Notification of aquisitions falling within competition law
merger rules 313
14.2 Notifications 313
14.3 Consumer credit licence approval – FSMA 2000, s 178
notices and the FCA 314
CHAPTER 15 IMPLEMENTING CHANGES TO THE WORKFORCE 315
15.1 General considerations 315
15.2 Redundancy 316
15.3 Changes to terms and conditions of employment 317
15.4 The implications of TUPE 2006 317
15.5 Consultation 318
15.6 Changes to the target’s board of directors or senior
management 320
CHAPTER 16 STAMP DUTY 323
16.1 General principles 323
16.2 Share purchases 323
vi
Contents
16.3 Business transfers 326
16.4 Paying stamp duty on shares 328
Part V Special Situations 331
CHAPTER 17 BUY-OUTS 333
17.1 Introduction 333
17.2 Conflict of interests 334
17.3 Due diligence 335
17.4 Shareholder consent 337
17.5 Financial assistance 337
17.6 Tax considerations 337
17.7 Warranties/disclosure 338
17.8 Assignability of warranty/indemnity claims 340
CHAPTER 18 BUYING AND SELLING TECHNOLOGY
BUSINESSES 341
18.1 Introduction 341
18.2 Distinguishing features of the sale and purchase of a
technology business 341
18.3 Due diligence 347
18.4 Employees 350
Part VI Precedents 353
Precedent A – Confidentiality letter 355
Precedent B – Data room rules 361
Precedent C – Offer letter: share purchase 365
Precedent D – Offer letter: business transfer 371
Precedent E – Due diligence request 377
Precedent F – Share purchase agreement 391
Precedent G – Limitations on warranty liability 439
Precedent H – Business transfer agreement 445
Precedent I – Disclosure letter 487
Precedent J – Completion agenda 491
Precedent K – Target board minutes 493
Precedent L – Power of attorney 497
Precedent M – Deed of contribution 499
Index 505
Downloadable precedents 521
Licence agreement 522
vii

Preface
This book is primarily designed for solicitors, accountants and corporate
financiers involved in private company mergers and acquisitions. It seeks
to provide a step-by-step guide to the sale and purchase process and the key
commercial, tax and legal issues arising from it.
This edition is, and earlier editions were, written by practitioners actively engaged
in private company merger and acquisition transactions. It is structured to reflect
the buying and selling process in practice and considers the issues arising from
both the seller’s and the purchaser’s perspective. The sale and purchase process
varies depending upon the identity of the party initiating it. Accordingly, in Part
I, the book covers the sale process from the seller’s perspective and, in Part II,
the acquisition process from the purchaser’s perspective.
The book covers most of the issues which the seller or purchaser (and their
advisers) are likely to encounter. Due to the way this book is structured, issues
of particular significance to the sale and purchase process are not addressed as
separate topics in the conventional manner. Instead they are addressed in the
context in which they would usually appear in the transaction.
This eleventh edition, the fifth for which the current author Susan Singleton has
been responsible, reflects the impact of a number of significant changes to the
law and applicable regulations since the last edition. In particular it has been
revised to include:
•• Finance Acts 2017–2021 which reflect changes to tax law;
•• changes to corporation tax and stamp duty;
•• Brexit where relevant and competition law changes including from
1 January 2021 when the post-Brexit transitional period ended and
4 January 2022 UK merger law changes for certain sensitive sectors
contained in the National Security and Investment Act 2021 and
accompanying guidance.
A full range of useful precedents is provided by way of online access using the
password provided.
The companies expressed to be bought or sold in this book are: (i) unquoted;
and (ii) limited by shares and incorporated under the Companies Acts; and
(iii) private. Although some acquisitions are of public companies and indeed
when I worked at Slaughter and May that would frequently be the case, most
acquisitions in the UK are not of public companies and my practice since has
largely been private sales and purchases. This is the market addressed by this
book. Readers should be aware there are important additional rules applicable to
sales of public companies which are not addressed in this book.
In the case of a sale of shares this book assumes that, unless specific reference
to a corporate seller is made, the seller is an individual. In the case of a business
transfer the seller is assumed to be a corporate seller. This book also assumes
that the purchaser is a single, corporate purchaser. The company or the business
to be sold and purchased is subsequently referred to as the ‘target’.
ix