Study guide
LPC Exam Notes - Mergers & Acquisitions Workshop 5 (University of Law)
Complete notes covering Workshop 5 of the University of Law's M&A Elective. This covers Conditional Contracts and Closing.
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
2 reviews
By: laurabowley10 • 2 year ago
By: jasminrakkar • 2 year ago
Content preview
ACQ5Conditional Contracts and Closing
Conditional contracts
Reasons for conditionality
Before completing an acquisition various approvals, consents and clearances may be required (problems holding
up deal), and ideally should be obtained before the sale and purchase agreement is signed. However, obtaining the
necessary consents and approvals can take some time, and the parties may prefer not to delay exchange of
contracts until all such matters have been resolved.
CHOICES
Total delay until condition fulfilled
Complete – who takes commercial risk of non-fulfilment (negotiate price reduction to compensate for
risk/cover with indemnities)
Walk away (incur transaction costs to date)
Enter into conditional contract – requires delay between signing and closing (exchanging and completion)
The sale and purchase agreement may, therefore, be made conditional on one or more matters
Thereby creating a DELAY between exchange and completion until condition fulfilled
This is an allocation of risk between B and S for the period between exchange and completion
Look at WHO CAUSED delay as this will affect the provisions in the conditional SPA (e.g. if purchaser caused
delay, seller will not want to repeat warranties/indemnities)
Main reasons and further examples
Need for shareholder approval – e.g. the issue of shares to the seller is the consideration for the target
Regulatory clearance – e.g. from the OFT or HMRC or some other regulatory body
3rd party consent – for release of security or the novation/assignment of important licences (e.g. IP or
environmental licenses) or from a landlord for the assignment of the lease
Satisfy listing arrangements as required by the listing rules
in the UK, HMRC issuing a clearance, say, on a share acquisition in relation to roll-over relief from capital tax on a
securities exchange
the CMA, or the jurisdictional equivalent competition authority, notifying the buyer that the acquisition will not
be subject to a Phase 2 investigation
the provision or transfer of a regulatory licence for the particular industry, for example environmental licences
for regulated industrial processes
a substantial customer or landlord providing its consent to an assignment, or confirming that it will not exercise a
contractual right to terminate an agreement with the target company on the change in control of the target
company
the shareholders of a corporate buyer passing a resolution, for example for the issue of shares to the seller in
consideration for the target and, if required, making arrangements for such shares to be listed on a market.
In some of these situations, the parties will not want to make the required applications, so making the
proposed acquisition public knowledge, until both parties are contractually committed to the acquisition.
In other circumstances, the conditions may simply be those required to complete the agreed terms of the
purchase.
1
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller izalpcnotes. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £3.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now