Marxman Advocaten has a team of specialists in the field of M&A - Berthe Schellinger and Pieter Verloop deal with this practice on a daily basis! Because they like to share our knowledge, a blog on this topic appears on our website every fortnight. Last time, we discussed due diligence; this week, an article on the purchase agreement.
Depending on the outcome of the due diligence (are the outcomes satisfactory to the buyer), a next step in the acquisition process may be the purchase agreement. Such purchase agreements are not standard. Each acquisition is unique and requires its own tailor-made purchase agreement.
There are different types of acquisitions. It may be that only the assets & (possibly) liabilities are taken over or that the shares (or part of the share capital) are taken over.
The parts that pass in a purchase agreement are largely the same for the different types of acquisition. It is important to pay attention to purchase price (how is it calculated) and method of payment (in instalments or a deferred payment), (division of) liability, warranties and indemnities, restrictive clauses (think of a non-compete clause for the seller and confidentiality).
Here again, the importance of due diligence comes into play.
Despite extensive discussions and negotiations, parties cannot discuss or foresee everything. During due diligence, certain risks may come to light. Therefore, an important part of the purchase agreement is the agreements around the division of liability. To what extent could the seller have seen and identified risks during due diligence. If a risk materialises, who is liable for it and for what amount? Is it still reasonable to ask for indemnifications or buyer, if an extensive due diligence has taken place and how extensive should those indemnifications be?
Properly recording agreements around all the issues raised above can prevent discussions at a later date.
Do you have questions about purchase agreements, warranties and indemnities or need help drafting or reviewing a purchase agreement? Our specialists will be happy to help you!