Stock Purchase Agreement Merger

12th April 2021

Stock Purchase Agreement Merger

posted in Uncategorized |

Legal due diligence is part of the due diligence phase prior to the presentation of the mandatory offer. It involves a comprehensive review of a company`s external and internal legal relationships. All essential contacts, such as supplier and customer contracts, employment contracts, litigation and ongoing litigation, will be analysed in detail. In the event of a share acquisition, the buyer acquires the shares of the target company from its shareholders. The target company remains exactly the same – its assets and commitments remain unchanged – but with a new ownership. In the case of a share purchase transaction, it is essential that the buyer negotiates insurance and guarantees regarding the target`s transaction, assets and liabilities, so that he or she has a complete and accurate understanding of the target entity. Depending on whether an acquisition is structured in the form of asset sales or share sales (or mergers), there are significant differences between the securities of the transaction. A substantial portion of an asset acquisition contract is used to identify assets to be acquired and liabilities to be accepted by the purchaser. As a general rule, the buyer wants the asset purchase contract to exclude the buyer from obligations other than the debts expressly assumed. If the provisions describe acquired assets and liabilities are carefully written, the seller`s insurance and guarantees may be limited to focusing on items that have or are likely to affect those assets and liabilities. In addition to an asset purchase agreement, other ancillary agreements are required to transfer assets from seller to buyer.

These include a sale invoice, transfer and acquisition agreements, transfer orders and bids for changes to the company`s name, as well as agreements to hire the company`s staff by the purchaser. The buyer wants the recidivism and warranty catalogue to cover as many problems as possible, while the seller would prefer not to limit them. As a result, this part of the share purchase agreement is generally the subject of intense negotiations. In the event of a merger, two companies form a legal entity, with the shareholders of the target company receiving shares from the purchaser, cash or a combination of the two. The surviving entity supports all assets, rights and liabilities of the company extinguished by application of the law. Mergers are often structured as “triangular,” with the buyer using a subsidiary (usually a new entity) merged into the target entity (an inverted triangular merger) or in which the target entity merges (a triangular merger at the front). One of the advantages of the triangular structure of the merger is that the buyer can protect himself against the debts of the target entity. This analysis is an important step before the development of the share purchase agreement. While the current actions could result in hefty fines for the buyer, a change in control clauses in supplier and customer contracts could threaten the company`s top line. The asset purchase structure is often used when the buyer wants to acquire a single division or business unit within a company.

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