Company Sale Purchase/ Company Acquisition

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Company Sale Purchase/ Company Acquisition


Letter of intent


Due diligence




Purchase agreement


Closing the deal


1.Heads of terms

2. Confidentiality agreement

3.Exclusivity agreement

4.Disclosure letter

5.Tax deed

6.Sale and purchase agreement




Key Documents

1.Heads of terms-This document sets out the key commercial terms of the proposed transaction. Although not generally legally binding, it will set the tone for the transaction. Once agreed it may be harder from a negotiation perspective for either party to go back on a point contained in the heads of terms, without good reason. Specific clauses relating to confidentiality and exclusivity may be included and, if so, these will be contractually binding.
2. Confidentiality agreement- The buyer will be under a duty not to disclose any confidential information it receives concerning the target company or business during the negotiation process. This duty may be reciprocal if information is also flowing from the buyer to the sellers or to ensure that the parties keep the proposed transaction itself confidential. Sometimes these confidentiality obligations will be combined with the exclusivity agreement or found in the heads of terms.
3.Exclusivity agreement- This gives the buyer a specified period of time to negotiate and complete the deal during which the sellers may not look for, provide information to, or negotiate with other possible buyers. Again, exclusivity arrangements are sometimes found in the heads of terms or combined with the confidentiality obligations.
4.Disclosure letter- This letter, prepared on behalf of the sellers and addressed to the buyer, acts to qualify the warranties and is one of the most important deal documents. It is supported by a disclosure bundle which contains any documents referred to in the disclosure letter.
5.Tax deed- In almost all share sales there will be a deed of tax indemnity (also known as a tax covenant). This may be a separate document or contained in a schedule to the sale and purchase agreement. It will require the sellers to indemnify the buyer for any pre-completion tax liabilities in the target company not arising in the ordinary course of business, or otherwise disclosed in its accounts. Indemnities impose a pound for pound payment obligation as distinct from a claim for damages under the warranties. There will be no tax deed on a business sale as the buyer will not be taking on the target company’s tax position.

Sale and purchase agreement

This is the main contractual document and contains the detailed terms of the sale and purchase. As a rule it is drafted by the buyer’s lawyers. It is usually a very lengthy document and prescribes:
how the purchase price is to be met and the mechanics of payment (for example, completion accounts)(on a business sale) the assets to be transferred.
any consents or conditions which must be obtained or satisfied before the deal can be completed
any restrictive covenants imposed on the sellers
completion mechanics

warranties and indemnities
detail relating to specialist areas such as real estate, pensions, employment and intellectual property
other matters such as limitations on the sellers’ liability, additional buyer protections or provisions dealing with how the business is to be run during any gap between exchange of contracts and completion.

Basic Features of Company Sale Purchase/ Company Acquisition

Preliminary stages

Buyer and sellers negotiate and sign heads of terms, confidentiality and exclusivity agreements (where applicable).

Due diligence

Buyer carries out its due diligence information gathering and analysis. Information obtained feeds into the drafting of the deal documents and negotiations generally.


Buyer and sellers negotiate the sale and purchase agreement and other ancillary documents. The heads of terms and information gathered during due diligence feed into the terms of the documents.


Sellers prepare and deliver the disclosure letter and bundle. Information may be received through disclosure which was not previously identified during due diligence and may extend or re-open negotiations. To the extent the buyer needs additional protection as a result of any disclosures this will be reflected in the deal documentation.


The sale and purchase agreement and disclosure letter are finalised and signed - known as exchange of contracts. The parties are now committed to completing the sale and purchase in accordance with its terms.Whenever possible completion will occur simultaneously with exchange but occasionally this will not be possible. Certain conditions may need to be fulfilled or third party consents obtained before completion can take place and it may be commercially too sensitive to seek these consents or resolution of these conditions ahead of exchange.


At completion, ownership of the company or business being acquired is transferred to the buyer.Completion, particularly of larger and more complex deals, traditionally involves a formal completion meeting attended by the buyer, sellers, their lawyers and other advisers. It can often be a lengthy meeting as the lawyers check that all the formalities are in place, the purchase monies are available and all the ancillary documents needed to finalise the sale and purchase are ready for signature. 

Important Notes

Practicalities will include:

board meetings and sometimes shareholder meetings

payment of the purchase price

release of charges connected with the sellers’ funding arrangements and implementation of any buyer’s funding

resignations and appointments of directors and auditors

execution of any additional transfers required on a business sale (for example, transfers of real property or intellectual property assignments)