Managing Your Cash Flow
Cross-border acquisitions: Maximising efficiency and minimising risk
4 min read
04 March 2015
Simon Rous, corporate partner at law firm Ashfords, provides a practical guide on organising a cross-border acquisition and other issues to consider when purchasing from or selling to a party in a different jurisdiction.
Key documents and data rooms
Cross-border acquisitions are often more complex and involve larger teams on both sides than same-jurisdiction transactions. The following documents will assist to improve the organisation and communication between the various teams involved:
Contact list: The list should include everyone who is involved in the transaction, from the buyer and seller to their legal counsel and accountants. It should set out their contact details and the times they are available (taking into consideration the different time zones of the different countries) to improve communication.
Step plan and timetable: The early establishment and sharing of a step plan and timetable will ensure that both buy and sale sides know what is expected of them for each stage of the transaction. It should also include critical dates and the public holidays of the jurisdictions involved to avoid any potential disruption.
Set up a virtual data room: This can provide a point to store and share the contact list, timetable, due diligence reports, information requests and any other key documents. It also can be a useful to monitor and control access by different teams.
Non-disclosure agreement: This (also known as a confidentiality agreement) ensures at an early stage that the buyer and seller intentions and sensitive data are kept confidential.
Principal document: The classic acquisition agreement under common law systems is a share sale and purchase agreement for a company or a business transfer agreement for an asset acquisition. Where the targets are located across more than one jurisdiction, an overarching framework agreement is generally used to cover the main commercial terms including price, warranties and conditionality etc, with local asset or share transfer documents can be used in each jurisdiction to meet local law requirements.
Closing agenda: A detailed closing agenda, agreed between the parties in advance, is invaluable. Often this will provide for a “pre-closing” process during which all documents are signed, but not yet released.
Other multi-jurisdictional factors
Culture and language: Identify or recruit in your team one or more individuals well versed in the language and culture of the target and other party. It will pay to do your homework on cultural differences including salutations, forms of addresses, body language, hand shaking, bowing and eye contact.
Establish a communication protocol: This can include the language that is to be used for all communication and drafting, setting up group email addresses and agreeing to use the dedicated data room for particular requests.
Regular conference calls: If time zones allow, arrange for weekly or regular conference calls with the key individuals in your team to report any progress and delays and more importantly, to maintain momentum.
What to be aware of
Anti-bribery and corruption: If the target business operates in unfamiliar countries or corruption is perceived to be high, a thorough assessment of local markets (including use of local agents) should be sought.
Legal opinion: A legal opinion should be obtained on any overseas seller/buyer, target or other company involved in the transaction to confirm valid incorporation, current status, solvency, and power to execute the transaction documents.
Buyer beware: In common law jurisdictions (such as England or the USA) as distinct from civil law jurisdictions (such as France and Germany) business buyers have limited statutory or implied protection and extensive warranties and indemnities are required.
As the above suggestions highlight, organisation and research into the jurisdiction as well as the target are vital in protecting the business and ensuring the transaction completes in a timely and efficient manner.
Simon Rous is a corporate partner at law firm Ashfords.