Cross Border M&A
Cross border advisory and transactional matters are an integral part of our firm’s activities. Our team comprises multi-cultural and multi-lingual lawyers with considerable experience of international deals and coordinating transactions efficiently across borders. We advise on both public and private M&A transactions, representing buyers, sellers, major shareholders, lenders, financial advisors, management groups and independent director committees.
We have experience in instructing local counsel and coordinating multi-jurisdictional legal advice in M&A transactions, offering a single point of contact and integrated legal solutions to the client. We are also members of two international associations of law firms, Legalink and Avrio, through which we have developed strong relationships with lawyers across the globe, including the U.S., the E.U., Australia, Canada, the Middle East and Latin America. These networks allow us to coordinate with experienced lawyers worldwide, to deliver timely and cost-effective solutions.
We aim to provide solution-oriented advice when encountering the many local and cross-border issues that typically arise in the course of cross border M&A transactions, including political considerations, cultural and communication barriers, executive and employee compensation, compliance with local takeover regimes, post-closing integration and transition, merger control and antitrust, transaction structures and due diligence that takes account of the target jurisdiction’s legal regime and local customs and practices.
We are particularly strong in China-related cross border transactions. As Chinese companies have risen to prominence in the global M&A market and more and more Chinese companies and clients seek to expand globally, we provide support to Chinese companies, including state owned and private Chinese companies in unfamiliar territories. We have experience in the particular challenges faced by Chinese companies in cross border M&A, from dealing with political sensitivities and investment restrictions on state owned enterprises in countries like the US and Australia to domestic concerns and regulatory approvals for outbound acquisitions that can complicate deal making and put Chinese bidders at a disadvantage, particularly in auction situations.
Warranties in share purchase agreement of M&A transactions and disclosures qualifying such representations
The provisions relating to representations and warranties are often the most contentious and most heavily negotiated part of the share purchase agreement and normally the schedule of warranties would take up to half of the length of the document.
Warranties are contractual statements which take the form of assurances from the seller as to the condition of the target company or business and, in particular, any existing liabilities. They provide the buyer with a remedy (claim for breach of warranty) if those statements are proven incorrect and the value of the target company is thereby reduced.
Warranties are particularly important given the lack of statutory or common law protection for the buyer as to the nature or extent of the assets and liabilities it is acquiring as well as the risks assumed by the buyer in acquiring a target company (including its tax history and all other past and future liabilities) (c.f. asset purchases where the buyer do not inherit all the liabilities of the buyer). Warranties therefore act as a post-completion price adjustment mechanism to the extent that unknown liabilities arise and the buyer suffers a loss.
Warranties are often drafted by buyer’s solicitors in the first draft of the share purchase agreement. These would normally include general warranties and specific warranties. General warranties are often contended and may relate to giving the buyer comfort that, inter alia, the buyer being provided with all relevant information, that there is nothing the seller knows which may affect the buyer’s decision which has not been disclosed etc. Specific warranties on the other hand deal with specific aspects of the target company or business being acquired and are often negotiated to include warranties relating to matters the seller discovers over its due diligence process.
The seller would often qualify representations and warranties in the share purchase agreement by disclosures in a disclosure letter. No claim will lie if the facts which give rise to breach of warranty were disclosed in the disclosure letter (as the buyer is taken to have been notified of such defects prior to completion of the acquisition). If the seller makes inadequate disclosures however, it may find itself on the receiving end of breach of warranty claims which it could have avoided.
The disclosure process supplements the due diligence exercise of the buyer and helps extract information on defects of the target before the sale is concluded, enabling the buyer to obtain an up-front price adjustment, an indemnity or to walk away if a particularly unpalatable disclosure is made.
A disclosure letter usually takes the form of a letter from the seller to the buyer and is usually divided into two parts: “general disclosures” and “specific disclosures”, and will have attached to it copies of documentation being disclosed. General disclosures cover matters which appear in the public domain or records which the buyer ought to be aware on the basis of its pre-contract enquiries and searches. Specific disclosures relates to actual matters which, if not disclosed, would constitute a breach of warranty and are made by reference to the warranties themselves.