M&A: Categorising vendor’s representations and warranties
One of the most negotiated points in a M&A transaction is the buyer’s remedies for breaches of vendor’s representations and warranties (“Vendor’s Warranties”) in a sale and purchase agreement (“SPA”). The various representations and warranties given by the vendor, if breached, may affect the transaction in varying degree. It may …
M&A: Three representations and warranties sellers should avoid
1. Representations and warranties about the future A seller should avoid providing representations and warranties in respect of future events due to uncertainty about the future. Further, after the seller disposes of the seller’s shares, the seller may no longer be in control of the target company and hence, not …
M&A: Minority shareholders’ protection
Today’s post is about provisions in shareholders’ agreement for the benefit of minority shareholders. It is common to have a shareholders’ agreement when an M&A transaction results in more than one shareholder in the target company. Some provisions to include in a shareholders’ agreement for the benefit of a minority …
M&A: Consider the following when structuring earnout payment
Earnout provisions in M&A sale and purchase agreements require careful consideration as there are many parts to the provisions. It is important to ensure there is no ambiguity to avoid dispute. Consider the following when structuring earnout payment: 1. What is the performance metric that needs to be achieved in order …
M&A: When a buyer is induced by pre-contractual representations
A buyer may decide to acquire shares or assets or accept certain terms in a sale and purchase agreement (SPA) based on verbal representations made by a seller. If these verbal representations turn out to be false, does the buyer have any cause of action against the seller? The seller …
M&A: The pitfalls of earnout
Earnout is commonly used to reconcile the differences between a seller’s expectation and a buyer’s willingness to pay the sum expected by the seller. It a contractual mechanism whereby the buyer will pay additional payment beyond the initial purchase price to the seller if the target company achieves certain business …
M&A: Why should buyer conduct due diligence instead of just relying on warranties
Buyer: “Why can’t we just rely on warranties given by the seller in the SPA? Why should we conduct due diligence on the target?” Here’s why: 1. Due diligence allows the buyer to: · identify any consents from authorities or other third parties that are required for the acquisition pursuant to the …
M&A: When sellers refuse to give warranties
In M&A transactions, it’s common for the sellers to provide warranties to the buyers as assurance to the buyers on the condition of the target companies or business. However, the following sellers may argue that they should not be required to provide warranties or are willing to provide limited warranties …
Understand the “why” for M&A transaction
As lawyers, we need to understand the “why” that drives each M&A transaction. Why? So that lawyers could prepare drafts that are aligned with the clients’ objectives. The most enjoyable and efficient M&A transaction that I have done was one which the client worked closely with us to provide the …
M&A in Malaysia: What you need to know about private limited company
A private company limited by shares is a common legal entity encountered in M&A transactions, either as a seller, buyer or target. Some of the key requirements governing a private limited company include: 1. The Companies Act 2016 (“CA”) requires a private limited company to have at least one director, …