This is specifically for the A&O Accelerated LPC. These notes got 89% on the Accelerated LPC. I was top of the cohort.
PS: Copyright owned by me - please think carefully before you pass notes on.
I. ACQUISITIONS
Tabbing right side pink!
Acquisition overview – examinable areas:
1. Due diligence
2. Negotiate documents
3. Exchange
4. Completion
5. Post-completion
a. Share sale vs. asset sale
Note where you are in the transaction + who you are advising – what do you get your money? Know the differences – LFQ/MCQ
SHARE SALE
Generally more straightforward – just one asset to transfer (the shares in LSL) and therefore potentially quicker and cheaper)
BUYER
Advantages Less time and expense
entire co purchased including all of assets + liabilities. Don’t have to spend time and cost on ensuring that it
acquires all of the assets that are required in order to run the business that it wishes to acquire
GOODWILL INTACT
less risk of an adverse effect on the goodwill of LSL as it will be acquired by Ritchisons with its name,
business connections and goodwill intact
CONTINUITY business of co carries on as it did prior to completion less disruption & no need TP
consent
Less disruptive
less disruption to LSL after completion
Ease of TRANSFER! + flexible – don’t have to acquire whole co
Disadvantage Liabilities
s risk that buyer will acquire a co [terminology important*] which has actual and/or potential liabilities of
which it was not aware (don’t want to be paying more than the co is worth)
More time spent on warranties and indemnities
Time and expense
More time spent + costs on the due diligence process in order to find out all about the co’s assets and
actual and potential liabilities
Stamp duty
payable on the full value of the seller shares bought by buyer
Tax disadvantages
tax liabilities of seller will stay with seller and will therefore become indirect liabilities of the buyer
+NB also problems if only some shares purchased buyer becomes minority shareholder
SELLER
Advantages Clean break
seller sells co together with its actual and potential liabilities (esp attractive where seller wishes to retire)
though note potential residual liabilities AAR of warranties + indemnities provided to the buyer in the
acquisition agreement
Tax advantages
the consideration will go directly to the sellers so proceeds will only be taxed once
Entrepreneur’s relief may be available
Disadvantage Not wholly a clean break if buyer may negotiate some warranties can be liable!
s must give up entire control and cannot continue operating part of it
ASSET SALE
(More documentation required in order to transfer all the assets being acquired from LSL by Ritchisons. This means that the
transaction may be more expensive to complete and may take longer (but generally more flexible))
BUYER
Advantages Cherry picking
buyer can decide which assets to buy and which liabilities of the business it will assume liabilities can
be left behind such as tax liabilities + outstanding litigation
Tax liabilities
will stay behind with seller
Onerous assets + debts
Buyer can leave behind the creditors and any unwanted or onerous assets of seller
Disadvantages More complex and thus more disruptive to business – have to negotiate which assets you’re buying
Possibility of delay to completion – assignments/novations/consents of key contracts and/or leases may
be required and this could result in completion being delayed
Tax disadvantages
SDLT will be payable and rates are higher than for stamp duty but SDLT is only payable on the properties
acquired and not on the full value of LSL. There is therefore no rule of thumb as to whether stamp duty or
SDLT is the cheapest. This would need to be analysed on a case by case basis
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