Before your company is bought or sold, it is important to have the advice of lawyers who specialise in acquisitions. Blenheim provides guidance to buyers and sellers in approximately 30 transactions a year and roughly the same number of investments and/or equity participations.


Before your company is bought or sold, it is important to have the advice of lawyers who specialise in acquisitions. Blenheim provides guidance to buyers and sellers in approximately 30 transactions a year and roughly the same number of investments and/or equity participations.

Trusted advisers for acquisitions

As an entrepreneur and a shareholder for a company, you regularly attract the attention of potential buyers interested in taking over your company. You only have one chance to make sure the sale is done right. For most business owners, the sale of their company is the culmination of years of hard work leading up to their retirement.

It is important that the sales process is managed by lawyers with a wealth of experience in the buying and selling of companies. Blenheim provides guidance to buyers and sellers in approximately 30 transactions a year and roughly the same number of investments and/or equity participations.
The sale or purchase of a company usually begins with an offer. If the offer is favourable, it is usually followed by a letter of intent (LOI) or term sheet.

The letter of intent before an acquisition

The letter of intent (LOI) or term sheet is a crucial part of the acquisition process. Not only does the LOI outline the main terms of the sale or purchase, but it also details the steps in the due diligence process, contains confidentiality provisions and defines the scope for any further negotiations. Having seasoned advisers to assist in the due diligence process is extremely important. To make the process more efficient, an electronic data room (EDR) is usually created. An EDR contains important legal and financial documents for the buyer to review. It is essential that all of the documents along with any questions asked by the potential buyer and the answers provided by the potential seller are coordinated through the EDR so that all of the relevant information is saved, especially if there is a disagreement about warranties and/or indemnities.

The LOI is an important document under Dutch law. Despite sounding like it might be just expressing intentions, an LOI can be a binding document. This means that the seller should properly negotiate the terms of the letter, for instance, that negotiations may be terminated at any time, without any obligation to continue them or to pay any damages. As such, the LOI dictates the contours of the deal and structures the rest of the process, making it a decisive factor in determining how much room there is in the negotiations.

If there are multiple potential buyers interested in purchasing a company, the seller would not want to agree to an exclusivity provision in the LOI but would instead want to be able to negotiate offers from other potential buyers. The lawyers at Blenheim are here to assist you.

Concluding a share purchase agreement after an offer has been accepted

After due diligence has been performed, the buyer will make a definitive offer to the seller. Should the offer be rejected, there will have to be further negotiations. Once the offer has been accepted, it will be documented as the final purchase price in a sales contract or share purchase agreement (SPA). The SPA is an important document in which the buyer and seller define the rights and obligations, as well as the conditions under which the company or its shares will be transferred.

It is important that the seller receives sound advice regarding indemnities and warranties, the term of the warranties and the extent of the liability that can stem from the warranties. Usually, liability can be limited to a percentage of the actual purchase price.

The difference between mergers and acquisitions

Though the words “merger” and “acquisition” are often used together, only a small number of transactions are actually mergers. During a merger, two legal entities unite into one new company, or one legal entity is absorbed into another legal entity. Mergers are often concluded for tax purposes. Experience has however shown that mergers often end in acquisitions. Sometimes the term “merger” is used to indicate an acquisition. This can be confusing when a transaction involves a regular acquisition rather than a true merger in the legal sense.

The joint venture, a partnership between two companies

An alternative to a merger is a joint venture. Two companies working closely together on equal footing agree to pool their resources to create synergies and sometimes even to sell their business entity. In a joint venture agreement (often called a shareholders’ agreement), it is essential that all of the arrangements between the two parties are written down, such as what happens in the event that one of the participants dies, or what steps are taken when a third party makes an offer to purchase the joint venture, especially when one of the participants wants to sell and the other does not.

Management buy-ins and management buy-outs

In a management buy-in (MBI), an external management team acquires a controlling ownership stake in a company and replaces its existing management team. In contrast, a management buy-out (MBO) is when a company’s management purchase either a controlling stake in the company or all of its shares.

The advantage of an MBO is that the company’s current management team knows the business well. This saves it from having to spend money on a long due diligence process. Additionally, the selling shareholder is often willing to accommodate the management team by providing a vendor loan to finance part or all of the purchase.

For the company’s management, an MBO can sometimes be complicated, for instance when there is a disagreement between management and shareholders. It is therefore important that both parties preserve confidentiality as part of their agreement and maintain a good working relationship even if the buy-out ends up not taking place.

Subscription and shareholders’ agreement

The lawyers at Blenheim regularly advise investors participating in an existing company. Blenheim advises (large) existing shareholders as well as future investors/shareholders. Coming to a good understanding is important. Understandings are often written down in an investor agreement or shareholders’ agreement (sometimes called a subscription and shareholders’ agreement).

Shareholders’ agreement and investor agreement

An investor agreement regulates the conditions under which an acceding investor/shareholder will participate in an existing company. Whenever multiple shareholders are buying or founding a company, it is essential to commit all understandings to paper in a detailed subscription and shareholders’ agreement.

Before it can come into effect, an investor agreement and a subscription and shareholders’ agreement must determine the valuation and the equity stake. It also stipulates the voting rights of management shareholders, the potential right of an investor to name an additional director to the board, and the potential right to determine who receives weighted voting rights and which decisions must be approved by shareholders at a shareholders’ meeting.

Some decisions can only be made with the permission of all shareholders (such as the issuing of shares, the liquidation of a company); other decisions (such as investments exceeding a certain amount) should only be made by a qualified majority. The agreements also outline what will happen in the event of death, and what steps must be taken if an offer is made to acquire the company or its business or if one of the shareholders wants to sell (a part of) the company and/or its business. In the latter case, it is a good idea to incorporate a drag-along or tag-along rights clause in the investor agreement or subscription and shareholders’ agreement.

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