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PA SGS 2 Consolidation
- Module
- Private Acquisitions
Comprehensive notes on SGS 2 private acquisitions based on learning outcomes and SGS activities.
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By: serdilkaya • 1 year ago
By: gayub1307 • 2 year ago
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Learning Outcomes1. better understand the various ways sellers and buyers seek to apportion liability under an acquisition agreement;
2. explain the requirements for effective disclosure and understand the importance for the buyer of specifying that
disclosure must be fair;
3. explain the purpose of simple vendor protection clauses;
4. understand the effectiveness of remedies for breach of warranty and misrepresentation; and
5. understand the importance for the seller of an effective entire agreement clause.
1. Issues
EMPLOYMENT ISSUES:
1. Employee’s service agreement
Ex: director resigns post-completion
issue for a buyer -> if service agreement contains restrictive covenants that are far too onerous to be enforceable
If D is resigning - buyer will want to be sure that he cannot decide to change his mind about retirement and set up a
competing business instead, which would be the case given that these restrictive covenants are unenforceable.
If clause imposes a confidentiality undertaking on D re business which continues indefinitely
o Gives a buyer some comfort but this does not address the non-compete issue
Advice:
A buyer would want D to enter into enforceable restrictive covenants before completion/resignation
D likely to expect additional consideration
Make seller aware that all of their service contracts may need to be reviewed as this issue may be relevant across
the group
buyer may also be concerned -> on completion the D holds a great deal of know-how about the biz
o ensure he stays for a short handover period (6 months to a year)
NB: missing docs. Ex: confirmation that variation of service agreement has been accepted by D
2. Typical tutor’s service agreement
to be anonymised before placed into data room
Anonymised data falls outside the scope of the Data Protection Act 2018 (‘DPA’) and General Data Protection
Regulations ((EU) 2016/679) bcs:
o it does not identify a living individual and therefore does not constitute personal data.
“processing” of any personal data must be done in accordance with DPA,
o seller must tell the relevant employee the reason for transferring the data to the bidders (i.e. the proposed
sale).
o Employment Rights Act 1996 - employees entitled to 1 week’s notice after 1 month’s service and then 1
week’s notice for every completed year of service if the period of continuous employment is 2 years or more
up to a maximum of 12 years.
3. Typical letter of appointment for freelancers
to be anonymised before placed into data room
Anonymised data falls outside the scope of the Data Protection Act 2018 (‘DPA’) and General Data Protection
Regulations ((EU) 2016/679
4. Shared services at head office including HR and payroll
These services will stop once target leaves the group
cost of making any alternative provision is going to be dependent on
1. the position of the buyer and
2. whether it already has this function within its group and the ease with which it can take on the additional work.
Effect of loss of shared services on the profitability of target will depend on the way the services have been costed
out in the group
Ex: services have been charged at a commercial rate -> their loss should not have much of an impact on T’s profitability
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