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Company Disposals and Acquisitions - Key Stages

The manner in which a transaction will proceed clearly depends upon the particular circumstances. However, below is an outline of the procedure involved in the typical deal.

Step 1 - Heads of Terms

It is common for the parties to have an initial letter of intent or heads of agreement setting out the main points which have been agreed. It must be made clear that there is no binding agreement until contracts are signed and until then either party may withdraw from the negotiations without liability.

Step 2 - Instruct Professionals

The parties instruct their lawyers and accountants. The purchaser enters into a confidentiality agreement and the information gathering process begins.

Step 3 - Draft Documents

It is usually the purchaser's solicitor who is responsible for preparing the draft sale agreement, the tax covenant and any other relevant documentation. The drafts are considered with the rest of the purchaser's team and then sent to the seller.

Step 4 - Review by Seller

The seller's advisers meet with the seller and review the draft documents. The seller's team also prepares a draft disclosure letter which is a document whereby the seller sets out key information relating to the business (often by reference to other documentation) with a view to minimising warranty claims by the purchaser. The disclosure letter, together with an amended draft sale agreement is sent to the purchaser's solicitor.

Step 5 - Review by Purchaser

The purchaser and its professional team meet to consider the changes proposed by the seller and the extent to which these are acceptable, particularly in light of the comprehensive information which should by then have been gathered.

Step 6 - Meeting of Lawyers

The lawyers for each party meet to try to agree points arising and to see those which are left outstanding for decision by the parties themselves on points of principle.

Step 7 - Round Table Meeting

Depending on whether any outstanding points can be resolved by other means there is often a round table meeting between the parties and their lawyers to try to thrash out any outstanding issues.

Step 8 - Completion Meeting

In other than the most simple cases there will be a meeting of the parties and lawyers at which the documents in their final form are signed and any monies are handed over. It is rare for there to be a period between signing of the contracts and completion.

Step 9 - After Completion

Leaving aside the practical aspects of the purchaser taking over the business there are a number of administrative and statutory compliance matters to be dealt with. The purchaser's solicitor will prepare a 'bible' containing copies of all key documents.