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Complete and comprehensive notes covering Workshop 1 of the University of Law's M&A Elective.
- Preliminary Matters
- Assets vs. Shares Acquisitions
- Merger Control Regulations (EU and UK)
- Heads of Terms
- Confidentiality Agreements.
ACQ1
Preliminary Matters
Types of Acquisitions
The term ‘acquisition’ is used to describe a wide variety of transactions involving the SALE AND PURCHASE of either the
underlying assets of an operational business, or the ownership and control of a corporate entity that operates a
business.
The TWO MOST COMMON types of acquisition are:
1. The sale and purchase of the underlying assets of an operational business (an Asset Acquisition); and
2. The sale and purchase of a private company (the ‘target company’) by share transfer (a Share Acquisition).
Share Sale Asset Sale
Shares are sold and money goes to SH directly. Assets and liabilities sold;
money goes to company, then to SH
Buyer acquires all or the majority of the shares in the (via dividends income or liquidation)
target; it is the ownership of the company itself which In an asset acquisition the buyer will acquire the
is transferred. underlying assets (premises, machinery) needed to carry
Target company remains in the same shape. on the business.
Company still owns and runs the business. Part of the purchase price will be attirubted to the
If target a wholly-owned subsidiary: goodwill which usually includes customer details and the
o To be a Holding Co. - Doesn’t need to own all of righ to use a trading name.
the shares; if Co owns over half the voting rights Each of these assets will be transferred in their required
then considered Holding Co under s. 1159 CA form i.e. conveyance for land, assignment for lease etc.
2006, as buyer will usually want to acquire all the Where sale to Co with one division; sell assets, distribute
shares then the Holding Co will be joined by other proceeds by dividend and dissolve the shell co.
sellers. Where sale to Co with numerous divisions;
o A buyer will usually want to acquire all the shares o Be careful with assets choose to transfer under sale
in order to avoid the dissenting SH situation and purchase agreement.
If Target Co has a subsidiary then ownership of that o Once sold, Co will decide whether to distribute the
will transfer along with the other assets. proceeds of sale to the shareholders or reinvest
Generally, require more work and subject to more then in new projects within the company.
regulations. IF sale of assets represents a transfer ‘of an economic
entity which retains its identity then TUPE will apply
(WS6) Basically maintains employee rights. The
responsibility of the employees will pass to the buyer
Because specific assets and liabilities are chosen it is
possible to avoid hidden or unwanted liabilities.
OTHER: Legal Merger
In certain jurisdictions it is possible to effect an acquisition by way of a legal merger between different
corporate entities through the use of a statutory procedure.
Most common in the United States (US) where acquisitions by a corporate entity are often undertaken by
way of a statutory merger. There are two main types of Merger:
1. Merger by Absorption; Assets and liabilities of one corporate entity are absorbed into another.
The transferor company is formally dissolved and, on its dissolution, it transfers all of its assets and
liabilities to the transferee company.
2. Merger by Formation; A new company is formed which absorbs the assets and liabilities of the
different companies. Here two or more companies are each dissolved and on dissolution transfer
all their assets and liabilities to a transferee company formed for the purpose of the merger.
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