Corporate
Corporate Tip 7: Private Mergers & Acquisitions
Part 4: The Sale and Purchase Agreement
Upon completion of due diligence and if the results satisfy the purchaser, the final step is to finalise and execute the sale and purchase agreement.
Representations and Warranties
The warranties provided by the seller in the sale and purchase agreement are often the most negotiated. Warranties serve two key purposes: they give the purchaser the right to claim for breach of contract if the warranties are untrue and they encourage the seller to disclose information about the target company, thereby limiting the seller's liability.
Impact on Purchase Price and Breach Consequences
Warranties affect the purchase price as the purchaser is likely more willing to pay if they have this protection. Warranties are tailored for each deal and often cover areas such as share ownership, finances, assets, employees, legal compliance, intellectual property, contracts, litigation, product liability and taxes. If a seller breaches a warranty, the purchaser can usually seek damages. Seeking indemnification provisions for warranty breaches in the sale and purchase agreement is often resisted by the seller.
Read more about the legal framework and considerations for a simple vanilla transaction under Singapore law to acquire a private limited company in SAL’s M&A Transaction Guide on: Mergers and Acquisitions Transaction Guide • lawnet.com/precedents
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