The purchase process is nearly complete. The price and Heads of Terms agreed, Due Diligence completed, final price negotiations sorted out, a draft contract prepared and a completion date set.

There are almost too many catch phrases that warn of the dangers in this last, critical phrase. “Winning horses fall at the last fence, favourites fail in the home straight” and best known of all “It is not over until the fat lady sings”.

Experienced acquisitors often insist that their own form of Contract is used, despite the tradition that the vendor’s solicitors prepare the draft contract. Every industry has its own quirks so that the solicitors’ book and internet set of standard precedents cannot always be tweaked to fit the sale/purchase of an agency.

PAYMENT

First – and most important, the funds necessary to complete must be in place in good time, any bank loan fully agreed and available for draw down.
If payments, other than cash, on completion have been agreed the documents must be in final form initialled by all parties and ready for signature on completion day.

SCHEDULES

Whenever possible, break down the sale/ purchase into separate elements that can be included in the contract in the form of schedules, to avoid cluttering the vital document with detail. This tactic allows specialist solicitors, or departments of the same firms, to produce Schedules to the Contract of Sale that can again be agreed in advance pending completion.

AGREEMENT OF THIRD PARTIES

While the principals to any transaction will accept the need for urgency to get everything ready in time, third parties are not driven by the same imperatives.

Matters that must be settled and ready for signature on completion, or signed in advance and held in escrow, will include:

• Sale of freehold property
• Assignment of Leases with head landlords’ approval
• Assignment of Leases, rental or HP agreements for vehicles, offi ce equipment, IT contracts and maintenance agreements
• Purchasers need to arrange:
  • Insurance cover for all categories of commercial insurance, including
  • Extending PI Insurance
  • Employers and Public Liability
  • Property, fixtures and fittings

ADVICE

Review advice on, and prepare documentation for:
• Capital Gains Tax and VAT payment
• TUPE regulations
• Contracts of employment for staff transferring to new employer
• Employees’ pension fund (398)

BUYING A COMPANY

Acquisitors are normally reluctant to purchase a company by buying the shares held by vendors. If this route is inevitable, special precautions are necessary.

Problems can be avoided to a limited extent by ‘emptying’ the company to be acquired of all assets and liabilities that are not essential to the transfer of ownership.

Examples will include:

• Purchase by vendors of personal use items, eg cars, computers, office furniture and fittings at a fair value
• Payment of creditors and collection of all monies due to the company
• Payment and cancellation of credit cards and any credit arrangements with sundry suppliers eg hotels, restaurants and clubs.

HIVING DOWN

Acquiring a ‘clean’ company, goodwill, business name and trademarks will enable the purchaser to transfer the remaining essential assets and liabilities to the acquirer and for the empty shell to be wound up after any corporation and other taxes have been agreed and paid.

It is common for part of the purchase price to be held in escrow in an account in the names of solicitors acting for both parties until all tax and liabilities are agreed and paid.

Warranties that taxes due have been paid, given by vendors, will be more extensive if shares are purchased than when a direct asset and goodwill sale is concerned. These may well extend to the personal tax affairs of exiting shareholders and their payment methods to staff, contractors and suppliers if rewards and benefits