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Asset/share purchase (Share deal peculiarities (SPA (Considerations,…

- - - - The purchaser's bank provides new facilities for the purpose of the asset purchase. Such facilities will generally be secured by way of a charge over the assets of the target business
    - - The funding is provided by one or more venture capitalist(s), which subscribe for shares (and sometimes loan notes) in the purchaser, which will typically be a new company established for the purpose of the asset purchase
    - - Where the purchaser is a public company, it may seek to raise funding by way of a straight placing, a vendor placing, a placing and open offer or a rights issue
- - - - To obtain sufficient information about the target business to enable the purchaser (and other parties interested in the transaction) to decide whether the proposed acquisition represents a sound commercial investment, to enable the purchaser to assess how to acquire the assets, and to ensure that the purchaser is acquiring what it thinks it is acquiring
      - Possibly, to re-negotiate the consideration payable under the acquisition agreement as a result of issues that arise from the dd exercise
  - - - Assets to be transferred - as the only assets (and, generally, liabilities) which are transferred on an asset purchase are those that the vendor and purchaser agree will be transferred, the acquisition agreement must clearly identify and specify the assets and liabilities to be transferred. This will be done by defining certain categories of assets and liabilities in the definition clause, and by reference to specific schedules listing assets within those categories
      - Liabilities - typically, an indemnity from the vendor to the purchaser in respect of liabilities of the target business prior to completion of the acquisition
      - Agreement to sell and purchase - a clause pursuant to which the vendor agrees to sell and the purchaser agrees to purchase the target business on completion.
      - Mechanics - how the various assets are to be transferred and the obligations of the vendor and the purchaser before and after completion to perfect the transfers and to ensure the smooth transfer of the target business
      - Consideration, including the manner in which (eg cash, shares or loan notes) and when the consideration to be satisfied. It is fairly common on asset purchases for part of the consideration to be withheld pending a stock take/valuation and/or the production of completion accounts
      - Whether the asset purchase is subject to any conditions precedent
      - Completion arrangements (including delivery of various transfer documents and provisions governing any gap between exchange and completion)
      - Warranties (and limitations) given by the vendor to the purchaser
      - Guarantees and indemnities
      - Any restrictive covenants which bind the parties
      - Other specific provisions (eg transfer of pension rights)
    - - At exchange (signing) the parties formally agree to enter into the asset purchase and at completion (closing) the necessary formalities to conclude the asset purchase are performed, accordingly
        
        At exchange, the parties will execute the acquisition agreement and disclosure letter
        
        At completion, the vendor will execute the various transfer documents and the purchaser will pay the consideration
        
        May be simultaneous (eliminates risks) or there may be a gap between exchange and completion
- - - - the owner of the target business which is to be sold
    - - the person which is to purchase the target business which is to be sold