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First published December 2016
ISBN 978-1-925672-90-9
© 2018 CCH Australia Limited
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Preface
Mergers and Acquisitions is a plain English reference guide for
mergers and acquisitions and buyouts with step-by-step advice on the
key legal, tax and structuring issues when implementing transactions.
It is a comprehensive guide intended to assist professionals,
investors, management teams and advisers and it gives detailed and
up-to-date information on each stage of the deal and related areas.
There are chapters on term sheets, shareholder arrangements, debt
financing and due diligence. The book also considers the best
approach to ensuring success in various specific deal types, including
initial public offerings, employee share option plans, investing in roll-
ups and distressed acquisitions. In each case the benefits and risks
are considered and industry statistics included. The book is primarily
focused on acquisitions and sales of private companies but also
includes a chapter on public company takeovers.
The useful checklists, definitions, case studies and examples all
contribute to making this an essential addition to the bookshelves of
all those involved in acquisitions, divestments and private equity.
Thoroughly researched and extensively verified, Mergers and
Acquisitions has been reviewed by a panel of industry experts,
including some of Australia’s best-known lawyers, investors, bankers
and corporate advisers.
Nick Humphrey
August 2018
Wolters Kluwer Acknowledgments
Wolters Kluwer wishes to thank the following who contributed to and
supported this publication:
Regional Director, Commercial Markets: Lauren Ma
Head of Legal Content: Carol Louw
Content Coordinator: Nathan Grice
Editor: Dr Keith Lupton
Cover Designer: Jessica Crocker
About the Author and Contributors
About the Author
Nick Humphrey is the Managing Partner of Hamilton Locke, a
corporate law firm specialising in complex corporate finance
transactions, including mergers and acquisitions, private equity,
distressed investing and special situations, capital markets and
alternative financing.
Nick has worked in leading corporate groups throughout his
distinguished career, including Mallesons Stephen Jaques and Norton
Rose in Sydney, and the private equity group at Clifford Chance in
London. He was also Global Co-Head of M&A at K&L Gates. He is the
Chairman of Emerson Corporate Legal Operations, which provides
company secretarial and compliance services.
He works with some of Australia’s leading private equity investors,
including Macquarie Bank, Mercury Capital, Pemba Capital, The
Growth Fund, Quadrant Private Equity and CHAMP Ventures, as well
as advising on a broad range of complex corporate transactions.
Nick focuses on partnering with institutions and private equity funds
(and their portfolios) and is very experienced in negotiating large and
complex acquisitions, divestments and investments, including
structuring share sales, negotiating shareholder and subscription
agreements and conducting due diligence investigations. He has
acted on some significant mid-market deals including the sale of
Gloria Jeans, Macquarie Bank’s investment into 3P Learning
(Mathletics), the buyout of Mac Pac, the sale of Diona Engineering
and CHAMP Ventures buyout of Lorna Jane.
Nick is also the chairman of the Australian Growth Company Awards,
a program launched in 2012 to recognise innovation, sustainability
and integrity. The Awards are run in partnership with Deloitte, NAB
Health, Macquarie Bank, GlobalX, Intralinks and 2020 Exchange.
Nick is also the author of a number of best-selling books on business,
law and leadership including Maverick Executive: Strategies for
Driving Clarity, Effectiveness and Focus; Penguin Small Business
Guide and The Business Startup Guide. He has published numerous
articles on private equity and M&A in the Australian Private Equity and
Venture Capital Journal (AVCJ).
He is regularly asked to provide commentary on private equity to the
media, including the Australian Financial Review, Sydney Morning
Herald, Financial Times and Wall Street Journal.
He attended the strategy and Leadership Programme at Harvard Law
School. Nick is a member of the Institute of Company Directors
(fellow), American Bar Association (Private Equity Committee) and
Financial Services Institute of Australasia (FINSIA).
He has been recognised by several influential awards and surveys as
one of Australia’s leading corporate lawyers. Among these are
Chambers Asia – Private Equity, Best Lawyer – Private Equity, Best
Lawyer – Venture Capital, Doyles – recommended for M&A, Legal500
– ranked for M&A, Dealmaker of the Year and ACQ Australian M&A
Team of year.
Contributors
Chapter 15: Structuring Issues Hal Lloyd is the co-founder and a
when Exiting Through an IPO, partner at Hamilton Locke with
Chapter 16: Structuring issues in focus on complex transactions
takeovers and schemes, Chapter that span M&A, buy-outs, capital
20: Distressed Mergers and markets and distressed or
Acquisitions restructuring transactions. In
addition to his expertise in
traditional M&A and private
equity transactions, Hal is one of
the few corporate transactional
lawyers in Australia with
extensive experience structuring
and executing distressed
transactions. Hal has also
practised in New York with a US
based global law firm and is
admitted to the New York Bar.
Chapter 9: Debt Finance, Zina Edwards is a Partner at
Chapter 20: Distressed Mergers Hamilton Locke. Zina has
and Acquisitions extensive experience advising
major trading and investment
banks, syndicates, funds and
public companies in relation to
various high profile and complex
financial turnarounds,
restructurings and special
situations. Zina has worked on a
large number of distressed
portfolio sale transactions in
Australia and across Asia, acting
for both purchasers and sellers.
She also specialises in debt
trading and alternative finance
transactions and has acted for a
wide range of funds and
alternative capital providers. Zina
previously worked in the
restructuring, turnaround and
insolvency team of Herbert Smith
Freehills in Sydney and has also
worked in the London and
Moscow office of Allen & Overy
as part of the global restructuring
group.
Chapter 17: ESOP Cristin McCoy is a Senior
Associate at Hamilton Locke
specialising in mergers and
acquisitions and corporate
transactions. Cristin has
experience advising across a
broad range of industries
including retail, mining services,
technology, manufacturing and
financial services. Cristin works
on a range of matters including
acquisition and disposal of
shares and assets, private equity
transactions, venture capital
investments and general
corporate advisory work.
Chapter 14: Key Issues with Gordon McCann is a corporate
Using W&I Insurance transactional partner at Hamilton
Locke, primarily involved in
private treaty mergers and
acquisitions in the Australian
mid-market. Gordon has a broad
practice ranging from private
equity funds (Quadrant Private
Equity and Mercury Capital) to
blue chip corporates or founders.
Gordon also has specific industry
expertise in warranty and
indemnity insurance having
advised global insurance
companies on hundreds of
insured M&A transactions.
Chapter 1: Preliminary issues in Janelle Watts is the Corporate
M&A, Chapter 5: Due Diligence, Development Manager at
Chapter 8: Equity Funding Hamilton Locke. Janelle is an
experienced corporate and
commercial lawyer, specialising
in private M&A and venture
capital. She has worked within
large national and global firms,
and prior to joining Hamilton
Locke, worked in-house at
Telstra, looking after the Telstra
Ventures portfolio and muru-D
(Telstra’s start up accelerator).
Chapter 18: Tax Issues, Chapter Betsy-Ann is a corporate and
15: Structuring Issues When transactional tax partner at K&L
Exiting Through an IPO, Chapter Gates with deep experience in
17: ESOP taxation issues associated with
mergers and acquisitions,
inbound and outbound
investment, asset financing,
cross border leasing and
corporate and international tax.
Chapter 22: Competition Law: Ayman is a partner at K&L Gates
Merger Clearance in Australia advising clients on all aspects of
antitrust/competition law as well
as consumer law. He regularly
advises on regulatory
investigations by the Australian
Competition & Consumer
Commission (ACCC) and on all
aspects of the Australian
Consumer Law.
Chapter 9: Debt Finance, Monty Loughlin, Lawyer,
Chapter 20: Distressed Mergers Hamilton Locke
and Acquisitions
Chapter 6: Introduction to Private Case study by Jeremy Samuel,
Equity Managing Director, Anacacia
Capital
Chapter 14: Key Issues with Reviewed by Guy Miller, Director,
Using W&I Insurance Risk Capital Advisors.
Chapter 19: Establishing a PE Leo Quintana, Chief Legal
Fund Officer, Magellan Financial
Group Limited
Chapter 19: Establishing a PE Liz Hastilow, Chief Legal Officer
Fund at Colonial First State Global
Asset Management
Glossary Based on the AVCAL glossary.
Thanks also to Renae DeVito, Executive Assistant to the Managing
Partner at Hamilton Locke, Brent Delaney, Partner at Hamilton Locke,
Gerald Seeto, Lawyer at Hamilton Locke, and Jessica Tang, Lawyer
at Hamilton Locke, and Tara Gazzard, Lawyer at Hamilton Locke.
PART A — M&A
PRELIMINARY ISSUES IN M&A
Deciding on shares versus business purchase ¶1-010
Negotiating confidentiality undertakings ¶1-020
General issues in negotiating term sheets ¶1-030
Acquisition term sheet ¶1-040
Editorial information
This chapter considers some of the issues to be resolved by the
parties early in the transaction.
¶1-010 Deciding on shares versus business purchase
Buyers will need to decide whether to acquire the shares in the
company or to acquire the underlying assets and business. Buying the
shares in a company involves not only buying the business of the
company but also taking on all its debts and liabilities.
The main factors to consider when deciding between buying the
shares and buying the business are:
• How much stamp duty or goods and services tax (GST) is
payable?
• Is warranty coverage adequate?
• Will financial assistance issues be manageable?
• What external consents are required?
