FAQs

You may be able to sue (or bring a claim) against a person or company if you have suffered a loss due to the actions or omissions of another person or entity. For example, you can issue Court proceedings if you are owed money, you are being treated unfairly as a shareholder, or a contract has been breached (amongst other disputes).

There are several important considerations before bringing a claim. Firstly, you should ensure your claim isn’t statute barred (for example, you have 6 years to bring a claim for breach of contract). Appropriate consideration will also need to be given to your likelihood of success and the likelihood of recovering any sum awarded (by checking if the company or individual you are bringing an action against is solvent or they have insurance to cover your claim). Your solicitor will also provide an estimate of costs and undertake a cost-benefit analysis.

If the dispute cannot be resolved by negotiation between the parties, a claim can be issued with the Court by filing the appropriate form, along with a Court fee. You can claim for a specified amount, or if the value of the claim is difficult to quantify, you can claim for an unspecified amount. Dependant on the complexity of your case, a Barrister may be instructed to prepare the pleadings and represent you in Court.

The litigation process begins with the completion of a claim form and accompanying ‘Particulars of Claim’, which will set out the facts of the case and the amount/remedy sought. These documents are then filed with the appropriate Court and served on your opponent. The other party (referred to as the Defendant), will be asked by the Court to file and serve an ‘Acknowledgement of Service’ confirming whether they admit or intend to defend the claim. If the Defendant is defending the claim, they have 28 days from service of the claim in which to file and serve their Defence. If the Defendant fails to provide a Defence, you can apply to the Court to have a default judgment entered against them.

If the Defendant engages with the proceedings and the matter proceeds to Court, there will likely be a Costs and Case Management Conference held, which is essentially a Court hearing to determine directions for the case and budget for the legal costs. A Judge will issue directions at the hearing, such as setting dates for disclosure and witness statements to be filed.

The parties will be expected to comply with the directions set by the Court before proceeding to the Trial. If the case has not been settled before the Trial, the matter will be determined by a Judge and an order will be made on liability and quantum.

Getting rid of a director is an option open to companies and the reasons for doing so can be numerous; whether there is a divergence on strategy or management or the director is deemed to be underperforming. Companies also often reach this point when a director is not complying with their duties.

When considering removing a director of a company it is important to check that all routes have been covered before resorting to litigation. It is worth noting that litigation is usually a last resort in terms of getting rid of a director and is only worth considering if the other, more common methods, have been exhausted and/or are not available.

The first place to look is the company’s articles of association and any other constitutional documents. These documents frequently have provisions on what should be done to remove a director and therefore it is important to check these before taking any other action. It goes without saying that well drafted articles of association will avoid ambiguity when the relationship with a director has run its course.

If no articles exist or the ones that do, do not contain provisions for the removal of a director, members of the company can then make use of the statutory procedure under the Companies Act 2006. The procedure for removing a director by ordinary resolution is set out in sections 168 and 169. An ordinary resolution (over 50%) can be passed at a meeting of the company. A formal notice must be served on the company at its registered office, by at least 28 clear days before a general meeting and a copy is to be sent by the board to the director to be removed. The director can make representations to the company regarding the resolution for removal and the decision will be put to vote.

As before, these are the most common methods of getting rid of a director and should always be considered before undertaking litigation but there are other situations where a director may be removed as a result of a court order.

An application for unfair prejudice under section 994 of the Companies Act 2006 can be made on the grounds that the company’s affairs have been conducted in a manner that is unfairly prejudicial to the interests of members, or that an act or omission of the company is unfairly prejudicial. The court has a wide discretion to make such order as it sees fit to remedy any unfair prejudice the petitioner can establish and therefore could potentially order the removal of a director. However, as has been seen, the courts are often reluctant to exercise their power in this way.

A director may also owe contractual duties to the company if there is a director’s service agreement, employment contract or letter of appointment in place or there may be malus or clawback clauses (and potentially under any shareholders’ agreements or personal guarantees). These should be checked to see what terms have been agreed regarding the termination of a director. There may be provisions in these that mean the director will removed if they breach the terms of the relevant contract. There is a real risk of an unfair dismissal claim being pursued where a director is also an employee so care must be taken throughout the process. A common remedy in breach of contract claims are damages however other remedies may be appropriate including recession or cancelling the contract, for example if the director has breached certain fiduciary duties or has made fraudulent or negligent misrepresentations.

To get the best value from solicitors you can take simple steps to save a fortune.

Have a clear estimate of costs 

Whilst your solicitor can advise and guide you as to your options, communicating to your solicitor what you expect them to achieve its key to obtaining a clear estimate of costs. Unless you provide clarity on the work you require you may well end up with an open-ended best case / worst case estimate which is not helpful to map your way financially through litigation. In addition to understanding your own costs liability, you also need to understand how exposed you are to your opponent’s costs liability too.

An overall costs estimate is fine but some of the stages of litigation are more time (and cost) intensive than others. All cases are different but certain stages such as disclosure, witness statements or trial are likely to be ‘hot spots’ so you keep that in mind when planning financially to fund litigation.

A way to keep costs contained is to work with your solicitor to put a cap on the fees or perhaps work to a fixed fee if that is appropriate to your case.

Do some of the work yourself

If you can complete some of the work yourself then you should!

When providing documents, avoid duplication and sending them in a piecemeal fashion. Solicitors charge for working through documents and if they are in apple-pie order, that review will take much less time and thereby cost you less.

If you need to explain the background to your case, why not deliver a time line of events /summary of key facts to your solicitor which will speed up the review.

If you have a clear idea of how you would like your drafts to be, then give suggested drafts of documents to your solicitor rather than asking for the solicitor to draft it from scratch.

Come prepared to meetings with a clear idea of what you want to achieve and if you have questions, issues or concerns, send them to your solicitor beforehand.

Don’t be put off by junior members of staff

They will be fully supervised by the solicitor in any event and have a much lower hourly charging rate.

Avoid the ‘principle of the thing’

Litigation can be stressful and much animosity can exist between the parties. Solicitors are not counsellors and are there to offer commercial legal advice and guidance. Bringing the focus to the commercial aspects of the case and avoiding personal/emotional aspects can mean a significant reduction in time for the solicitor to help you which translates into costs savings for you.

Settlement will buy certainty in litigation and avoid future costs/risks. In fact, a well negotiated settlement can achieve an outcome which is well outside of the parameters of an order a Judge could make (which could mean a better result for you!). Keeping settlement in mind and reviewing this regularly with your solicitor could well achieve an early result on the best terms.

This question can really be broken down into three parts. Firstly, can you transfer your house or assets – yes you probably can. Secondly, will the transfer likely avoid creditors or bankruptcy – the answer is, it depends but there are mechanisms in place which can ultimately mean the transactions could be challenged. Then finally, should you do it – with it being inherently risky the answer is more than likely no.

If you decide to transfer assets or your home and are ultimately made bankrupt, on the making of a bankruptcy order the trustee in bankruptcy has the power to review transactions made by you before the making of the order (‘antecedent transactions’) and these can be challenged in court by the trustee in bankruptcy or official receiver. This is covered by sections 339-343 of the Insolvency Act 1986.

These antecedent transactions can be challenged as it ensures the best recovery for creditors and offers protection of the pari passu principal (or “equal in right of payment”) that your assets must be shared equally among the unsecured creditors.

The Insolvency Act 1986 outlines the various types of transactions that can be challenged. They include:

• Transactions at an undervalue (for example, a transfer of property for no consideration or a gift of property). These are covered by section 339.
• Preferences (for example, paying unsecured creditors in priority to other creditors) These are covered by section 340.
• Excessive pension contributions, covered by section 342A.
• Extortionate credit transactions, covered by section 343.
• Transactions defrauding creditors (i.e., the purpose of the transaction was to put assets beyond the reach of a creditor), covered by section 423.

The trustee in bankruptcy usually challenges an antecedent transaction by applying to court. There is wide discretion on behalf of the court to undo the effect of the transaction and this can often mean ordering the return of assets or an equivalent value payment to the bankrupt’s estate. The crux of the current question is, if transfers can be made in order to avoid creditors. In this instance, there is unlikely to be any protection of assets and the court will look at all the evidence to determine this.

Transactions made within the 2 years before the date of the bankruptcy application are likely to be called into question but generally speaking, transfers made more than 5 years before the presentation of the bankruptcy petition may be harder to challenge by the official receiver or trustee in bankruptcy. However, this may depend on the purpose of the transfer itself because there is no time limit if the intention was to defraud creditors.

In terms of transferring your house, in many cases it will be the most valuable asset in your estate. If you divested any interest you had in the house, (which is often done by transferring the interest to a partner) prior to being declared bankrupt, then this transaction may be set aside as a transaction at an undervalue in circumstances where no consideration was received, or it was less than the market value.

It is important also to flag if you are found to have committed a Bankruptcy Offence under Section 350(6) you may be liable to imprisonment or a fine, or both.

Court proceedings can be expensive, time-consuming and stressful. It is entirely possible to resolve a commercial dispute without seeking recourse from the Court. In fact, the majority of cases are settled either before Court proceedings are issued, or out of Court once proceedings have already been issued.

Negotiation

Most cases are resolved by negotiation and agreement, in which case they do not run their full course. This will take the form of correspondence between the parties, often referred to as ‘pre-action correspondence’ where each party sets out the full particulars of their case. Following this exchange, it may be appropriate to make a formal offer for settlement or arrange a meeting on a without prejudice basis. If a conversation or correspondence is ‘without prejudice’, the statements made cannot be put before the Court if proceeding are issued, provided that the statements are made in a genuine attempt to settle the dispute.

Part 36 Offer

Throughout every matter, consideration should be given as to whether a ‘Part 36 offer’ should be made. A Part 36 Offer can be a very important tactical step as it can protect your position on costs. This is because if a reasonable Part 36 offer is not accepted, and the matter proceeds to Court, there are potential cost consequences for the party who fails to accept. In summary, if an offer is made by the Claimant and a judgment is obtained that is equal to or more advantageous than the offer, the Defendant will be ordered to pay the Claimant’s costs, together with interest on the sum awarded. Likewise, if an offer is made by the Defendant, and they obtain a judgment that is less than or equal to the offer, the Claimant will be ordered to pay the Defendant’s costs, together with interest on those costs.

Alternative Dispute Resolution (ADR)

There are other more cost-effective alternatives to Court proceedings such as mediation, early neutral evaluation, adjudication and arbitration (collectively referred to as “ADR”). In any contractual dispute, you would be well advised to check whether the contract specifies a certain method of ADR that must be followed prior to the issue of Court proceedings. For example, in the case of construction contracts, you will likely find a clause specifying that any dispute must be referred to arbitration or adjudication.

The most common method of ADR is mediation. Mediation is a process whereby the parties meet with an independent and impartial mediator, who will assist them in the negotiation of their differences. This process is entirely confidential and will not be binding unless both parties agree. Often mediation will result in a settlement, which will be drawn up into a settlement agreement and will be legally binding once signed by the relevant parties.

Sources of funding

There are many sources of funding for a business. If we assume that the business is in a private limited company, which is the most common entity in which to run a business, the most usual are:

1. Funding from the Company’s shareholders and/or directors– All private limited companies will have some funding from its shareholders and/or directors. Every private limited company will have issued shares to its shareholders. The amount paid for those shares are part of that Company’s share capital. This may not be much and initially may be only £1. Shareholders and Directors may also choose to make loans to the Company. Sometimes this is to fund a particular situation and sometimes it is effectively more permanent funding. They may charge interest or may not. The reason you might put money in as a loan rather than for shares tends to be it is easier to repay loans than it is to realise value in shares.

2. Loan Funding from Banks/Financial Institutions– Most companies have some funding from banks or other financial institutions. This might just be credit facilities on your normal banking activities (e.g debt that might arise on credit cards or BACS facilities or letters of credit) or it could be more formal overdrafts (essentially repayable whenever the bank or other financial institution asks for it) or loans (which will be repayable on the basis agreed with the bank or other financial institution). These loans tend to come with the need for security from the Company and possibly from its shareholders and/or directors.

3. Equity Funding from Banks/Financial Institutions– You may seek funding from banks or other financial institutions in exchange for shares in the Company. There are many different ways to do this but typically the risk on this type of funding is higher so the bank or other financial institutions will want a higher return and will tend to take a mix of preference shares with an agreed return and ordinary shares so they share in any exit event of the Company. This type of funding also tends to have loan funding as well.

4. Funding from Business Angels– This tends to be early stage funding and is therefore very high risk. This tends to be a mix of shares in a similar way to banks or other financial institutions and loans.

What is right for you?

The type of funding is key. You will want to pay the least you can for the funding you want to obtain but being realistic you have to consider how much risk any loan or equity provider is taking and when they can be repaid. Key considerations are:

1. What security can you offer?

If you have assets and debts that you can give security over this lessens the risk and in turn should lessen what you have to pay for the funding. Please bear in mind that the assets and debts will be assessed so that their value if you did not pay could be taken into account. Debt from blue chip companies (i.e. a nationally or internationally recognized, well-established, and financially sound company that is publicly traded) such as Coca Cola or government will be valued more highly from a risk perspective than debts from local customers no matter how well they tend to pay. You may be prepared to give personal guarantees or even security on your personal property which again would lessen risk to a lender but obviously increase risk for you.

2. How much have the Company’s shareholders and directors lent or otherwise invested in the Company?

The better the balance sheet for a Company looks the better from a lender perspective. You may find a lender wants you to agree that you cannot take your money out until the lender has been repaid and this is something to consider.

3. How much of your Company are you prepared to offer? 

We have all seen Dragon’s Den where people value their Companies highly and have those valuations shot down. Realistically an equity investment is high risk and the percentage required may be higher than you are prepared to give. A lender may also want a seat on the board or an observer at board meetings. This can be a blessing if you get on with the person and they bring relevant experience but can also be a burden if you have different views in how the Company should be run. You are likely to have little control over the identity of the person and they are likely to change over time.

They may also want leaver provisions in the Company’s articles of association so that if you cease to be employed by the Company you have to sell your shares. How much for is a matter for negotiation.

An equity investor is likely to want an exit in 3 to 5 years.

4. What do your projections say?

Expect a lender to look closely at your projections in any business plan. They will expect them to be realistic and that you believe they are achievable based on the information available to you. They will then stress test them. They will want to make sure you can pay them back and deliver a return. They will not expect to be taking all the risk so they will want a margin for error. Expect a bank to want at least twice as much in security terms for what you may wish to borrow for lending. Equity investment will depend on their view of your business and the market it operates in.

What’s the answer?

There will be a different answer for each Company. If you have a good feel for your business you will look for your funding in good time. Last minute desperation is a great way to get a bad deal or no deal at all. You will probably want to appoint a corporate finance adviser to look for funding with you. Lenders do not always want the same types of businesses. Some of them may have had bad experiences with companies in your sector. A corporate finance adviser should have a good feel for which lenders are looking for what types of business at the time. Always look at it from a lenders perspective and consider their risk profile. If you have a good track record with your existing funder they are likely to be a good first port of call if only to give you a feel of what you can get at what cost. If you have a deal then it is likely to be easier to get an alternative at a better cost.

Overview

‘Mergers and Acquisitions’ is the term generally used to describe the types of corporate transaction involving 2 or more businesses coming together to form one new business, and these deals run in much the same way regardless of the size of the deal.

Commonly this is achieved by means of one company acquiring another company, either via a share acquisition (the buying company acquires the shares of the target company from its shareholders) or an asset acquisition (the buying company acquires the business and assets of the target company from the company).

In other circumstances, there may be less of a buyer/seller context and more of a joint exercise of bringing 2 (or more) companies together. Again this can be structured in a number of ways including by means of transfers of shares or assets.

Who is involved?

There are a number of parties who are generally involved in getting a deal done (and we are referring here to private company deals rather than deals done between listed companies, where the deal structures are different).

For private company deals, the cast of relevant parties generally involves some or all of the following, as well as the buyer and seller:

Solicitor

The role of the solicitor, whether on the buy-side or sell-side of a transaction, is to document and negotiate the legal terms of the deal from start to finish. As such, the law firm is generally introduced towards the beginning of the process and take responsibility for delivery of the deal, in tandem with the CF advisor/accountant.

Corporate Finance adviser

A corporate finance (‘CF’) adviser is (generally-speaking) an accountant that specialises in corporate transactions. Sometimes badged as a standalone CF business, or sometimes comprised of 1 or more individuals within a specialist team at a firm of accountants, the CF adviser can fulfil a number of roles, according to the circumstances. These can include:

• Marketing a business for sale and sourcing a buyer
• Negotiating a deal at high level between buyer and seller
• Project-managing a deal to completion
• Liaising with other professional service providers

Accountant and tax adviser

In a role which can overlap into (and in some cases replace) that of the CF advisor, a buyer or seller will engage their accountants and tax advisors to review financial and tax aspects of the deal structure and how they will be affected.

What are the steps to getting a deal done?

In broad terms, the steps to a successful M&A deal require the following:

• an investigation process into the target business
• the agreement of the high-level deal structure
• the engagement of advisors
• an organised and proactive deal process
• commerciality on all sides

All of the advisers need to be part of delivery of this.

Please take a look at some of our other Q&As covering other aspects of the Corporate process, for some more colour around the detailed process to achieving a successful transaction.

What is it?

Corporate Governance refers to the manner in which companies are run. Essentially, we are talking about the boardroom issues for which the directors of a company are responsible on a day to day basis and which the shareholders, as custodians of the business, will want to oversee being dealt with properly.

At a basic level corporate governance is concerned with the board of directors putting in place an appropriate strategy for the business, ensuring the correct procedures and people are in place to implement that strategy, and ensuring that the company keeps a detailed and accurate record of all decisions in relation to that strategy in order to be able to report effectively to the shareholders.

More specifically, corporate governance should concern the broader board room issues at the forefront of the minds of those responsible for running a company. Chief among these will be climate change, energy efficiency, community engagement, health and safety, diversity and inclusion, anti-bribery and anti-money laundering.

Why is it important?

There are two main reasons companies should be concerned with good corporate governance. First is brand recognition. The reason the issues listed above are key boardroom issues is that these are the issues which society deems most important to be tackled. Consumers expect businesses to be sensitive to these issues and to put in place strategies which seek to embrace an environmentally friendly and socially responsible way to do business. Not doing so presents the very real risk of being named and shamed and the business will suffer accordingly.

The second key point is in relation to potential investment. Corporate governance is a key area of concern for any prospective investor and will form a key part of any due diligence process. Investors will look for good governance as a marker of a business which has a strong reputation and good financial prospects. This is one of the key ways in which they can manage their risk when seeking to inject capital into a business. A well-organised business with a clear strategy and appropriate processes in place to deal with key issues will present an attractive opportunity to prospective investors.

How is it managed?

The board of directors is responsible for the day to day management of a company and it will therefore fall to them to put in place appropriate processes for good corporate governance. The shareholders also have an important role to play firstly in putting in place an appropriately skilled and experienced team to sit on the board, and secondly in overseeing the functioning of the board.

Good corporate governance starts with devising a simple strategy for the business and putting the correct people in place to implement that strategy and who will maintain strong and detailed reporting lines with the custodians of the business. There is no magic to this process beyond being disciplined, organised and proactive around a strategy which has been broken down into a series of simple, easy to follow steps.

Overview 

When an investor chooses to invest in a company, there will be a variety of ways for the relationship between the investor and the company to be documented. The actual choice of type of investment agreement, and its contents, will depend on a number of factors including the nature of the investor – whether it is an institutional private equity investor or an individual, for example – and the relationship between the parties.

Generally speaking, the most common scenario at play here is that of an investment structured by way of the investing party taking shares in the relevant company, and his/her rights and obligations regarding conduct of the company (and likewise the rights and obligations of the other shareholders, and the directors) being recorded in some form of shareholders agreement – which can also be referred to as an investment agreement and a subscription agreement. There are differences between these types of document but the terms are often used interchangeably – and not always correctly.

In many circumstances an investment is made party in shares (ie a payment made for shares in a company) and partly in debt (ie a loan to the company, repayable to the lender/investor). In some cases loans are made which are convertible into shares, ie can be turned into shares at the request of the lender.

The investment agreement 

It follows from the above that there is not a single structure of document that governs all investments, nor is there is standard list of matters included in an investment agreement. There are some common threads, however, which appear in many agreements and structures. These include:

• A list of matters which the company may not undertake, post-investment, without the consent of the investor

• A list of financial information to be supplied to the investor on a regular basis allowing them to monitor financial performance of the business

• A right for the investor to nominate an individual (whether the investor himself or not) to sit on the board of directors of the company
• A series of provisions governing rights and obligations in relation to the transfer of shares in the company, including a variety of circumstances wherein a shareholder may be obliged to transfer his or her shares to the other shareholders, and describing the price to be received on such transfer

Key issues

A practical and pragmatic approach is needed to negotiating investment documents, which is based on the nature of the commercial relationship which the parties (company, investor, directors and management team) have agreed to have. The scope of the legal documents should, for example, reflect whether the investor will be involved ‘hands-on’ to any material degree, or will be a passive investor with protections but little actual involvement in the business.

Your advisors should base the legal documents around these commercial realities from the outset. If done correctly, investment documentation simply amounts to a set of outline rules of conduct which do not impinge on the effective and smooth operation of the business.

What is private equity and when might a business encounter it?

‘Private equity’ is the term given to investment partnerships whose aim is to invest in companies, grow that investment and then exit with substantial gains. The investors that provide the capital to the PE funds are typically institutional and accredited investors.

Businesses typically engage with PE either where PE acquires the business in its entirety or where PE backs management or another buyer. A business may also engage with PE where it is acquiring a substantial shareholding in the company for a significant investment.

Particular considerations when dealing with PE

Because PE’s capital comes from investors via a fund which needs to provide returns in the medium term (7-10 years), PE will view its investment in your business from that perspective. The average holding period in 2021 for PE fund investments was 5.2 years. In that timeframe the goal is for the investee company to achieve substantial growth and enhanced profitability so the PE fund’s exit is at a much-increased valuation.

As such businesses find the relationship with PE to be results driven, with substantial emphasis on information reporting and realising efficiencies. This is because this information is fed back to the fund managers to report to investors on the performance of the fund investments and by extension, the fund itself.

It is important to be aware that the PE usually funds all or a significant portion of its investment with debt which needs to be serviced by the business. The injection of substantial capital which PE can provide often enables a company to be more competitive, grow rapidly and achieve and even exceed its aims. Conversely, it can impose unsustainable debt on the business and prevent the business from remaining competitive by limiting the ability to invest in infrastructure, innovation and other business-critical functions. It is therefore vital to ensure that you engage with the PE house and develop a detailed business plan which you and your management team are comfortable is achievable and meets the needs of the business.

It is also worth noting that the PE market is increasingly specialised. This means that you have every opportunity to engage with a PE house which can bring particular sector specialisms, know-how and contacts. And with a collaborative relationship with your investor director and the team thar supports the investment, this can enable the business to achieve new heights.

How to get the most out of your relationship with your PE house

Being clear about the objectives of the PE fund itself, its time horizon for its investment in your business and relevant experience with other portfolio businesses will enable you to maximise the benefit of the relationship. Similarly, a willingness to engage in the details of the business plan from the outset and as it evolves throughout the life of the investment. Collaborate, challenge where necessary and maintain clarity on your respective objectives.

Sources of delay

It’s a common and often justified criticism of advisors to corporate deals that they charge a lot of money for an apparently disorganised and slow process.

There are various reasons why a corporate transaction can be delayed, and some of these can be outside anyone’s control. An isolated example would be the need to get the consent of a third party (eg the Financial Conduct Authority) to completion of a deal in the financial services sector. Many other similar examples exist of 3rd parties that can be the source of delay.

Management of the process

However, the deal process itself, how it is managed, and the role of the advisors in strongly directing the process, are all critical factors here.

Transactions, large and small, tend to follow a similar pattern in terms of process – for example, heads of terms leading to the appointment of legal advisors, leading to drafting of legal documents and negotiation of these.

It is very easy for parties to drift into a “process” and for clients – quite rightly – to have a sense at times that the process is just on autopilot. Deal “drift” can arise, where it can seem that parties are reacting rather than actively pursuing the next stage of a negotiation. Coupled with this, weak communication lines can lead to a sense of frustration and unease on the part of a client who doesn’t understand exactly what is going on at any given stage – all they can see is frantic email traffic on points they either don’t understand, or which may not be relevant to their commercial wishes.

Much of this is down to simple factors – communication, proactivity, and strong management of the process. Project management and organisation is at the foundation of any successful deal. Commonly this falls to the corporate finance advisors at the centre of the transaction, who will direct process, timetable and milestones. This is not always the case, in the absence of a project-management role being assumed by a CF advisor, good corporate lawyers will instead drive the process.

Collaboration

Critical in all of this is fostering a sense of collaboration and teamwork – firstly, between advisors on your team – the lawyers talking the same language as the accountants, and working together effectively. But also, a collaborative approach between buy-side and sell-side is something that creates a high degree of trust and can materially impact timetable in a positive way. Rarely do we work with clients who enjoy the sight of us “going to war” with our opposite numbers – this rarely serves the client, increases frustration, anxiety and cost, and delays the timetable.

And – critically – what matters are the desired commercial outcomes for the clients. Good deal-management is an exercise in tuning into the client’s drivers and commercial requirements, advising on those, and getting them achieved. All too often lawyers attempt to impose on clients their view of what things should look like, and mistaking this for good advice.

What’s the answer?

The key foundations for an efficient deal process are simple – fostering a collaborative approach, focusing on the desired commercial outcome, being highly organised, and driving timetable in a proactive manner. Getting off email and into a meeting room works wonders.

The complexities of a transaction may nonetheless mean that it takes several weeks or even months to complete, but the advisors are central to this – it’s all about their taking ownership of the process.

How to go about buying a business is a wide question, and the right approach and answer will depend on a number of factors, including your business type, experience of deal-doing, and appetite for risk.

Acquiring a business, whether as a free-standing entity or to bring it into your existing business, tends to involve a number of key (and perhaps obvious) steps, including:

• Form a clear view of the strategic rationale behind the type of business you will target

• Apply criteria based on the above to identify potential target businesses which are of the appropriate industry type / size / profitability / location etc

• Decide on appropriate deal structure, compose an offer within an appropriate structure, and negotiate/agree headline deal terms with sellers

• Identify your funding requirements and solutions to these

• Execute the transaction

Acquisition structures and deal process

Deals come in many shapes and sizes, and a full walk-through the range of structures is outside the scope of this note. That said, the majority of acquisition deals fall into 2 basic categories – an acquisition of the assets of the target business from the company that owns those assets, or an acquisition of the shares of the target business from its existing shareholders.

There are a number of key differences, as well as a number of similarities, between an asset deal and a share deal – the risk profile and tax treatment of the transaction are perhaps the most notable differentiator. But in either case the broad approach to the deal will tend to follow a similar pattern:

• Agree headline terms and record these in offer letter or heads of terms

• Undertake a Q&A process of ‘due diligence’ investigation into the target business

• Document the terms of the deal and allocate risk within the scope of these legal documents

Where to start and how to get it done

Regardless of a buyer’s experience levels, a deal tends to sap significant management time, and can be a frustratingly slow process unless highly organised and driven in a proactive way by the parties and their advisors. Key to achieving this is compiling your deal team as early as possible.

The composition of that team depends on the circumstances – but will likely require a number of key management personnel from your business as well as external advisors. Those external advisors may well include some or all of the following:

• Corporate finance advisor – whose role varies from deal to deal but may extend to identifying a target business and helping to broker a deal and source funding;
• Corporate lawyer – who will advise on deal structure and will negotiate and execute the deal and any associated funding documentation;

• Accounting and tax support – sometimes a function provided by the corporate finance advisor, your accountants and tax advisors will input into structure and will (alongside the lawyers) manage the due diligence process and advise on optimal deal structures to mitigate any identified risks.