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Planning to start mergers and acquisitions in Luxembourg? This could be a well-tailored plan as part of your growth strategy. Some of the largest and successful companies in the world were born out of mergers or acquisitions. Maybe you are thinking about diversifying into new markets, expanding geographically, improving market share or looking for new financing options such as equity investments in Luxembourg companies. If so, you may find this material interesting.

Due diligence of private M&A in Luxembourg

A typical Luxembourg private equity deal starts with an auction.

Prior to the auction, an important step should be made – conducting a comprehensive M&A due diligence in Luxembourg. Typically, the procedure is conducted after both parties  have agreed in principle to a deal but before a binding contract is signed.

Often, potential buyers are pressed for time and have to check the documents that are available in the virtual database very quickly. The DD verification period lasts 3 to 4 weeks. 

Corporate due diligence for private M&A is carried out to confirm the firm's compliance with legal regulations, IPR, investigate insolvency issues, etc. A public company buyer usually has stricter compliance issues.

The audited entities in this jurisdiction are mainly non-production holding companies. Please keep in mind that companies of this kind are involved in holding operations, and this may limit the scope of DD verification.

Where to find info

Most Luxembourgish companies are required to submit information to a legal online newspaper, including:

  • constituent documents and their subsequent changes;
  • annual reports;
  • data on the management team, prevailing powers;
  • details of JSC for private LLCs.

Normally, the buyer requires an extract from the register confirming the existence of the company on that date and a registration certificate.

Financing private acquisitions 

The acquisition of Luxembourg companies through a private M&A transaction can be fully funded by the buyer's equity capital. Most often this happens when buying a SME.  In bigger transactions a bank loan is most often used.

Buyers also often borrow from alternative sources (funds and institutional investors). High yield financing and bond issues are also fairly common as financing instruments.

Final word

M&A deals in any country often raise complex financial, regulatory and operational issues. Most founders are not well-versed in running an M&A deal, making the entire process longer. Price remains a critical factor for buyers and sellers but dozens of other issues need to be effectively addressed in order to successfully complete a deal. Crucially, the buyer needs to answer the questions connected with the DD of the target object such as how to organize the verification process, what to look for, and how the findings impact the transaction.

IQ Decision UK offers a wide range of services for corporate clients. Our prime target is to have a long relationship with our clients and their satisfaction is at the top of our daily work.

Our company's services include:

  • advice on the regulation of M&A transactions in Luxembourg;
  • advice on structuring private mergers and acquisitions;
  • advice on obtaining IP protection in M&A deals in Luxembourg.

Our seasoned professionals also provide consultations on conducting due diligence of the target company in Luxembourg.

Reach out to us using contacts on the website.