Identifying Acquisition Candidates & Commencing Negotiations
If you do not have a specific acquisition target in mind, you may wish to review what businesses or companies are for sale. Newspapers, particularly the Financial Times, carry a section devoted to businesses for sale. Merchant banks, accountants and business sales agents will also maintain lists of companies and businesses for sale. Often companies offered by public advertisement are in receivership.
When you respond to an advertisement for a company in receivership, you will receive a package of information from the receiver. You are likely to be required to make a cash bid on an auction basis and will also be expected to buy the business or company without warranties.
If there is a particular company in which you are interested and you wish to find out more about it without its knowledge, you can search public registers such as Companies House, obtain reports from credit reference agencies and consult business libraries, information services and other published registers.
Corporate acquisitions are complex and require considerable technical expertise whatever the scale of the business. You will need expert legal, tax and accounting advice from the outset to formulate the structure of the deal and settle the documentation. In particular, if the target is a listed company, special care is required as Stock Exchange Rules and the City Code on Takeovers and Mergers set down procedural rules which must be precisely followed.
At the start of negotiations, there are certain basic points to agree and set down in writing. The parties should agree confidentiality provisions e.g. agreeing not to disclose or misuse any information they obtain during the due diligence exercise. The seller may also agree to allow you perhaps three months exclusivity in which the seller will not try to sell to anyone else. As the buyer, you may wish to seek to persuade the seller to bear some responsibility for professional fees for unjustified withdrawal from negotiations and vice versa. You should take care to ensure that preliminary correspondence referring to your offer to buy is clearly stated as not to be legally binding on you (e.g. by stating "Subject to Contract"). You ought to be able to withdraw at any time up until the stage at which you sign a formal agreement to buy.
Where you are using intermediaries such as merchant banks, accountants or others, make sure they have clearly defined roles and terms.